Single Family with HELOC?

Question

Looking for some advice

I’m new to REI and want to find the best way to move forward. Right now, house hacking is out of the picture for me, and I have to stay in the Borough of Paramus for the time being.

I currently live in Paramus and bought my house with cash, no mortgage (with some outside help). With over 200k in equity, I was thinking about getting an FHA loan on another single family property (also in Paramus) so I can rent out my original house, build equity in the new one, build amortization and perhaps positive cash flow.

Is it wise to do an  FHA loan on the new property, or is it better to put down 20%, using a HELOC from my original house? Can you suggest any other paths for me to get started in REI with this information?

Dominic Pizzi · Answer

Hey Nat!

I think the FHA would be useful if you are considering the possibility of renting out the house you currently live in to go and buy this property. You can put 3.5% down on the newest property, live in it for a year and then refi into a long term loan again as you can't hold multiple FHA loans at one time. You could also do a refinance on your current property and use additional funds to purchase many investment properties, there seemingly is a lot of options at your disposal!

Zack Karp · Answer

@Nat Love get a heloc on your current house, 100%.  Even if you don't use it, it costs you nothing (or next to nothing).  But once you move out and it becomes an investment property, then getting a heloc becomes a challenge, and even if you can get one the terms will be worse.  Then if you need it for future investing, it's already in place.

I'm confused, you said you don't want to house hack, but you want to buy a new primary and keep your current property, that's exactly the definition of house hacking...

For your next house, it depends on your future goals and the numbers.  Do you want to just buy 1 more property, or are you looking to build a portfolio of properties?

If you ever want to buy a 2-4 unit property, you will want to save your FHA loan for that.  You can buy a primary 1-unit property with 5% down with a Conventional loan, so if this next property is a 1-unit, that's the way to go.

Best of luck!

Zack Karp · Answer

@Nat Love common misconception, you do not need 20% for a Conventional loan. First time homebuyers can do 3% down, and repeat buyers can do 5% down.

If you need any help mapping out your long term strategy, and how to get to properties 3,4,5+ most efficiently, feel free to reach out.

Best of luck!

Joseph Beilke · Answer

HELCO right now are not a smart move because the rate is variable, and if the FED continues to increase rate you might end up not being able to make the payments or gain any traction.    I would consider the a fix rate mortgage on your current house, enough to get you 25 -30% down on your next, plus some cash to buy down the next house rate.

Single Family with HELOC?

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