Leveraging my finances with Househacking

Philadelphia, Pennsylvania
House Hacking
9moFollow

Leveraging my finances with Househacking

Elmer Wayne Fisher
Rental Property Investor · York Pa · Member since 2023 · 18 posts · 14 votes

I've recently been approved for an FHA Loan of 3.5% down on a $300,000 loan.

I also took out a $50,000 line of credit against my current SFR

How big of a property ( specifically a 2-4 unit ) can I buy considering other costs like closing costs, realtor fees, rehab costs etc? 


also is it wise to max leverage the potential property?

2Reply
100 views

Most Popular Reply

Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
9mo

on the leverage piece, it's not generally smart to be at 100% leverage. You're paying more in an interest so the property needs to perform better.

id recommend saving some money for reserves outside the heloc (which was smart to do so you can access in the event of an emergency). 

[email protected]
Brick House CPAs53 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Jaycee GreenePro Member
    Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 726 votes
    9mo
    Quote from @Elmer Wayne Fisher:

    I've recently been approved for an FHA Loan of 3.5% down on a $300,000 loan.

    I also took out a $50,000 line of credit against my current SFR

    How big of a property ( specifically a 2-4 unit ) can I buy considering other costs like closing costs, realtor fees, rehab costs etc? 


    also is it wise to max leverage the potential property?

     @Elmer Wayne Fisher All depends on the cash flow of the part of the property you won't occupy. So you've been approved for a $300k loan?

    [email protected]
    0Reply
  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 589 posts · 445 votes
    9mo

    Hey Elmer, congrats on getting approved, that’s a big step.

    A few things to keep in mind when you're combining an FHA loan with a line of credit:

    1. Your buying power isn’t just the loan amount, it’s the total project budget.

    With FHA at 3.5 percent down on $300K, your out-of-pocket down payment is roughly:

    • $300,000 × 3.5 percent ≈ $10,500
    • Plus closing costs (usually $8K–$12K on FHA in PA)
    • Plus any upfront reserves your lender requires

    Your $50K line of credit will need to cover all of the following:

    • Down payment
    • Closing costs
    • Inspections and appraisal
    • Rehab
    • Holding costs during rehab
    • Furniture if you plan to pad-split or house hack aggressively

    Because of that, most FHA buyers end up in the $250K–$350K purchase range for a duplex or triplex, depending on rehab scope.

    2. How big of a 2–4 unit you can buy depends on the self-sufficiency test.

    For triplexes and quads, FHA requires the self-sufficiency rule, meaning:

    In many markets, that limits how expensive a property you can buy unless rents are unusually strong.

    For duplexes, this rule does not apply, which is why most house hackers start there.

    3. Should you max leverage?

    My honest advice:

    No. Not with an FHA and a LOC.

    You’re already stacking two layers of leverage. If you also buy a heavy rehab with razor-thin reserves, one bad contractor or inspection can wipe you out fast.

    Instead:

    • Leave a cushion from that $50K
    • Aim for a property where you can live in one unit and the other unit covers most of your payment
    • Keep at least $8K–$15K in reserves after closing

    4. A good rule of thumb:

    Buy the property where the numbers still work even if your LOC maxes out earlier than expected. Rehab always costs more than estimated.

    0Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    9mo

    on the leverage piece, it's not generally smart to be at 100% leverage. You're paying more in an interest so the property needs to perform better.

    id recommend saving some money for reserves outside the heloc (which was smart to do so you can access in the event of an emergency). 

    [email protected]
    Brick House CPAs53 Reviews
    WebsiteView Page
    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    9mo

    @Elmer Wayne Fisher thanks for the post here. So, this is your 2nd property? I'm guessing that your first property isn't a FHA loan? And why are you only approved with an FHA loan? Why not conventional? So, I'm asking these for a reason...the same person who will answer those previous 3 questions will also answer your first question - your loan officer. The only person who can tell you "how big" of a property you can buy is your loan officer (I'm thinking by "how big" means the purchase price? If you meant something else, let us know and we'll answer it differently). Now, even if you can be approved for significantly higher amount, doesn't mean you HAVE to take it. So, always work within the numbers that are comfortable for you no matter what the "expert" states.

    Now, for your last question - when it comes to your primary home many of us start out with high LTV's on the properties. I mean, SURE....it's better to not be in debt at all...but most of us don't have that option. Once you put money into a property it can be hard to pull it back out. So, I would recommend to use the standard mortgage maximum amount that you can use. Leveraging your assets is common. Keeping more money in the bank allows you to have MORE choices on other things if they were to arise - emergencies, investment opportunities, another property?

    Hope all of that makes sense.

    0Reply
  • Elmer Wayne Fisher
    OP
    Rental Property Investor · York Pa · Member since 2023 · 18 posts · 14 votes
    9mo

    Thank you everyone for your valuable feedback!

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9mo
    Quote from @Elmer Wayne Fisher:

    I've recently been approved for an FHA Loan of 3.5% down on a $300,000 loan.

    I also took out a $50,000 line of credit against my current SFR

    How big of a property ( specifically a 2-4 unit ) can I buy considering other costs like closing costs, realtor fees, rehab costs etc? 


    also is it wise to max leverage the potential property?


     The main factor in addressing your question is based on income so your qualifying income and that formula (46.99%front/56.99% back end) will determine your maximum borrowing power or ability.

    the front ratio of 46.99% is just the monthly PITIA(principal/interest/taxes/insurance/assessments) divided by your income. This only takes into account the monthly payment you're trying to buy and in essence you do backwards math till you work your way into a maximum loan amount or purchase price usign this 46.99%.

    The backend of 56.99% or 10% higher than your front ratio of 46.99% just means you have 10% of your monthly gross income for all your other debts like car loans monthly student loans credit cards etc (other debt basically), you cannot exceed this otherwise it will reduce your front ratio vice versa (IE if your back end stuff is 20% that only leaves you 36.99% for our front ratio = total of 56.99%).

    You can payoff debt, get a raise at your job, you can buy down your rate, get a cheaper insurance quote, have your brother refinance your car off your name, etc (strategies to reduce your DTI to increase your borrowing power). These are just some solutions before seeing your scenario but if we were your lender we would have already discussed this during our initial consultation.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free