All Forum Posts by: Nick Victorio

What do you care about the interest rate on an $89k loan?  If you get HOSED and get and pay an extra 2-3% you’re talking about $200/mo at the worst. Get a 15 year mortgage and you probably cut your payments in half even at the higher interest rate as I assume there are less than 15 years left on the current mortgage. 

Ps. Your parents should definitely sell and take the tax free gain, especially out of California, this could save them 30% or more. As soon as they out you on title or gift it to you or whatever other 6 figure mistake they should talk to an expert if they’re planning on anything other than a straight sale. Remember, you would inherit their low basis/high taxes if you’re on title before their deaths. Only you couldn’t avoid them. 

If you wouldn’t buy the property from a stranger as a rental, it’s a bad rental. The fact you already own it doesn’t make it a good one. Why not sell it and buy 2 free and clear in their new low tax, landlord friendly state?

It might take a decade just to “earn” the taxable profit that could be theirs today tax free with a sale. IF everything goes perfectly. 

A second lien on the house may enable you to get the job done.  This second mortgage would be more expensive than your current rates, but you have a lot of equity that you can tap into.  Local community banks and credit unions are where I go for this kind of loan.  

Hard money loans can be used...only they will want to be in first position, so that low rate mortgage goes away.  But they (probably) won't report to your personal credit.  Construction loans will be the same way, but they do report to your personal credit. 

You'll have to use funds from other sources to renovate the current structure. What you are proposing will take more than the $100k you have access to, and those funds I would consider as "emergency only'" money. Otherwise you burn through your "spare" money and the HELOC and the house isn't done yet...and now you have high utilization on the HELOC, making the entire thing a really difficult endeavor to get out of.

As I think about it, I might do it in stages and renovate the house, and get it rented. Save up, or do further research on getting the ADU financed.

It is one of the more difficult aspects of the market right now...tapping into equity is getting progressively more difficult to do, while still keeping those low interest rate first mortgages.  Something has to give.