Newbie Using Home Equity to Finance a Deal

[Michael Hildebrand]

Hi everyone! New here and looking for options with regards to using the equity in our current home to get started investing. Apologies in advance for the long winded post!

I'm working on an off market deal back in my home town for a 1200 sq ft 2 bed 1.5 bath home with a detached 2 car garage. It has been updated throughout the past 10 years and major capital items are all less than 10 years old (furnace, roof, water heater, etc...). The property is in great shape and the biggest upside is there is an opportunity to add another unit to the back half of the lot (another 2 bed 1 bath home).

The property is in a small Wyoming town with very low inventory. The property recently appraised for 268k in January and each home would rent for 1200-1300 dollars when finished. Since the appraisal, the market has slowed and prices are coming down, but not rapidly, the seller is however willing to work on the price, he just doesn't want to do any type of seller financing.

I have great contacts back home for contractors and subs and the new home would cost between $150-170 per SQ ft to complete (looking between 800 and 1000 SQ ft) after discussing builds with them.

Now that that's all out there... I'm inexperienced in using home equity for financing deals, but my wife and I have roughly 300k in equity at this time. I've been looking into HELOCs with local banks and credit unions, but should I be exploring other options for that equity or using different financing all together for a deal like this?

Thanks for taking the time to read this if you've made it this far! Any help or advice is much appreciated!