Small farm and teacher wanting to add small multifamily

Waco, Texas
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Small farm and teacher wanting to add small multifamily

Brent JohnsonPro Member
Member since 2026 · 2 posts · 0 votes

Hello! My wife and I have a small family farm in between Dallas and Waco. We are wanting to add a small multifamily property and grow from there. We are trying to figure out the best way to finance. We have equity and retirement but not sure where to go from there. We've researched loans but keep getting mixed advice on the best type of financing. Any help would be appreciated. At the moment we're thinking a HELOC and DSCR, however some advice has been to take a loan against retirement holdings but we've also been told that's illegal. Thanks for any direction or ideas we can investigate further.

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 503 votes
    20h

    I would first want to figure out if the property was in a rural area as that will affect lending options. This is usually determined by how many people are in the local population. Also, if the zoning will allow for a small multifamily to be added. From there, finding out what the permitting process is if it's allowed.

    Sometimes real estate investors don't find out about items like these and then that can affect their profitability. I have worked with real estate investors who had to tear down their units when the rules in their local area weren't followed.

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  • Hossein Sharifi
    Member since 2023 · 15 posts · 6 votes
    18h

    Start with zoning and rural classification before you pick a financing product, because those two gates kill more deals than rate does. A HELOC can work as a short bridge if you have a clear refi exit, but I'd underwrite the multifamily on its own rents and reserves rather than leaning on farm cash flow. On retirement money, a 401(k) loan is very different from a prohibited IRA transaction, so get that from a tax pro first. Once you know the site can hold units, shop DSCR vs. conventional with a lender who does rural small multifamily regularly.

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  • Brent JohnsonPro Member
    OP
    Member since 2026 · 2 posts · 0 votes
    18h
    Sorry, let me clarify. Looking for an existing one for sale within an hour or two from us. (Waco, temple, Killeen) There are universities and military bases in those cities.
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  • Harrison C.
    Member since 2017 · 20 posts · 9 votes
    14h

    Brent, I can't add much on the loan side, but since you said Waco, Temple and Killeen, I'd think about who the renter is before you pick the building.

    Near a base, a soldier can end a lease early when they get orders. That's federal law (the SCRA), so plan on more turnover than the lease says. Near a university everything runs on the school year. A unit that's empty in September is hard to fill until the next semester, so the lease dates matter about as much as the price.

    And at an hour or two away, the mortgage isnt what wears you out. Its move-ins, lockouts and small repairs. I rent houses by the bedroom and every resident gets their own door code, so nobody has to drive over with a key. That and one handyman you trust in that town covers most of it.

    One more thing to run next to the duplex numbers: a regular 4 bedroom house near campus rented one room at a time. Four rents on one roof can beat two.

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  • Joe Piccirello
    Lender · Peoria, AZ · Member since 2026 · 19 posts · 7 votes
    14h

    A HELOC against the farm or your home (if it qualifies and you have usable equity) plus a DSCR loan on the multifamily is a path a lot of people look at when they want to leave retirement accounts alone. DSCR underwriting leans on the property's rents covering the payment, so it can fit when farm or W-2 income alone makes a conventional investment loan messy.

    On borrowing against retirement, the mixed advice usually comes from different account types. Some workplace 401(k) plans allow participant loans under that plan's rules. IRAs generally do not allow borrowing, and self-directed setups have strict prohibited-transaction rules. Confirm with the plan administrator and a tax pro before you lean on that path.

    If you compare lenders, shop with quick quotes first so you can line up the structure (HELOC vs DSCR vs a conventional investment loan) and the pricing side by side.

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  • Arman AhmedPro Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 927 votes
    10h
    Quote from @Brent Johnson:

    Hello! My wife and I have a small family farm in between Dallas and Waco. We are wanting to add a small multifamily property and grow from there. We are trying to figure out the best way to finance. We have equity and retirement but not sure where to go from there. We've researched loans but keep getting mixed advice on the best type of financing. Any help would be appreciated. At the moment we're thinking a HELOC and DSCR, however some advice has been to take a loan against retirement holdings but we've also been told that's illegal. Thanks for any direction or ideas we can investigate further.

    You've got a few options with the equity you already have, but I'd be careful about borrowing against everything just to get the first multifamily. I'd compare a HELOC, conventional financing, and DSCR based on the actual property and how much cash you want to keep in reserve. I'd also consider looking outside Texas if the numbers make sense. Some Midwest markets have lower entry prices, so you may be able to get into a small multifamily without stretching your capital as much.

    [email protected]614-418-6081
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