HELOC on my house to get some Investment Money?

[Karla Sprowell]

Over 7 years ago I purchase my SFH (a REO) with an FHA Loan and a 3.5% Interest Rate. We consistently made extra payments towards the Principal and currently (due the high jump in prices recently) our house is worth more than twice what we paid for. That seems great since it has a pretty good equity now.

We are learning through BP books, podcasts and webinars about the many possibilities to invest inReal Estate and are eager to begin. Buy and Hold seems like our preferred flavor and would like to find a property to purchase that may have a SFH with an ADU to rent (not precisely a Duplex since those are hard to find around here and we'd like to stay close to our first deals).

We have some savings and additionally would like to take the equity on our house but have some questions:

*Can we (or should we) first refinance our house to convert it into a Conventional Loan to "free" our FHA purchase availability? We'd like to keep our current house but rent it and we'd be moving to the new property that would have to be near by, so we have no problem occupying the unit for 1 or 2 years. (House Hacking)

* Would the HELOC on the house be "step number 2"?

We just don’t know if those possibilities can happen together or not and if so, if they are a good move for newbies like us.

Also, if you know of any LOAN EXPERTS that already have Investments in the Tampa Bay Area and are open to have a conversation with us, it would be fantastic!

Thanks,

K.

[Kristina Kuba]

@Karla Sprowell

I have done this exact same strategy to build my own portfolio with my spouse. Here is what I did and what I would recommend. (I would propose steering away from FHA loans because there are too many constraints, the required down payments differences are nominal and it is not a scalable strategy).

First, I would look into getting prequalified for a conventional loan that is non jumbo meaning in it approximately less than $647,200 in Tampa. In Tampa, in most scenarios, the loan limits are $647,200 for non jumbo and that allows you two things: (1) you can use a departure lease (2) the down payment requirements start at only 5%. In Tampa, in most scenarios, the loan limits are $647,200 if you want to use a departure lease and the down payment requirements can start at only 5%. What is a Departure lease? - If the current residence is converted to an investment property, Fannie Mae will continue to permit up to 75 percent of the rental income to be used to offset the mortgage payment for DTI purposes.

Second, you want to explore buying in Seminole Heights / Riverside Heights / Hyde Park where a lot of single family residences have auxiliary dwelling units / ADUs / carriage houses.

Now you have your 1st house being paid by tenants and your new house mortgage being subsided by potential STR or LTR rent from your back unit.

Smaller banks and local credit unions might do a RELOC… rental equity line of credit… so you can always grab equity from your 1st home to purchase your 3rd, and 4th and so on! And if history tells us anything, when rates lighten up in 2023/2024 you can also cash out REFI your 1st home and keep that cash permanently.

You definitely are in a good equity place and have the right investment strategy in mind!. This is probably a lot to take in, please feel free to DM and I can explain further and connect you to a local lender that can help you with this investment strategy. Best of Luck!