Investor Financing to buy another property to 3 duplexes on

[Samantha Chacon-Johnson]

Hello, 
I am new to real estate investing. For background and context my husband and I own a small duplex and live on one side (House hack). We got some bad advice and are living through the University of hard knocks. We took out a HELOC to re-side/insulate the house and we were told we could re-finance the HELOC into a new mortgage, but leave the rest of the equity in the house. Come to find out this is not possible.... So moving on, we are slowly paying off the HELOC, so in a few years we can refinance to get a lower payment to get a higher cash flow. At the moment that equity is not accessible to us right now, but will be in about 2 years. This is not a problem for us. This is just the background on why we cannot do a HELOC on our duplex to purchase a property to build. Also, not interested in selling this property for many reasons, so please don't suggest it. Instead, Lets get creative :).

We have low debt to income, good income, and good credit scores. I have spoken to a lender/broker about our buying power and we can buy another duplex at a purchase price of 650k. However, I would like to keep it around 550k. Recently, I came across a property that has a 2 Bed/1 bath on it and has the potential to put 3 duplexes on it (3 Beds each/2 Baths) the current purchase price is $459k. My husband and I would like to house hack the first duplex and live in one side, rent the other, and rent the 2 by 1. Then take out a HELOC or construction loan for the 2nd duplex to be build. However, we only have 10K saved and will likely need to use a an inventor to get started. In Eugene/Springfield Oregon it seems more advantageous to buy then build to grow our portfolio/equity. Here is where I am a Rookie and need advice/knowledge.

I don't know how using an investor would work. If I ask for a loan from an investor of 50K, what is the interest? Can I buy you out in a HELOC or Refinance when the project is done? What does this typically look like when using an investor? How do create and exit plan for the investor? I don't know anything about this process and would love pros/con advice and possibly ways to get started. The investor does not need to help me get contraction loans or permits, or a contractor, etc.

How do you defer payments for 1 year to get the first build done? Is this possible? What is this specifically called? Any advice in this area would be great. 

Thanks, Samantha

[Clayton Silva]

If I understand your scenario, I think you got bad advice from whomever said you could not refinance the HELOC. There are multiple ways to do this.

1) replace old heloc with new heloc (effectively just refinance the HELOC itself)

2) Take out a larger first position lien to pay off HELOC. Example: primary mortgage is 300k and HELOC is 100k, you then apply for a new 400k refinance to pay off the first and second lien (primary mtg and HELOC).

3) Convert HELOC into HELOAN for lower rate fixed 30 year payment.

Unless you do not qualify for the higher loan balance or are upside down on equity, I have no idea why you would not be able to refinance the HELOC.