Head Start in DC

[Ron Mill]

I live in a one bdrm one btrm condo which is owned outright by my wife and I. The plan is to purchase a larger permanent residence due to an addition to our family (little one on the way). Once we move into our new home we will begin our RE investment journey by making the condo our first rental property. In this area, rent will be 1k+ per month. My current job will provide the income needed to have the down payment and closing costs for an additional rental property in the same year of our home purchase. My question is, should we mortgage the debt free condo and use the cash to make down payments on multiple properties for quicker acquisitions or... Use my personal cash to make down payments at a slower rate? I don't want to take on too much too early but I also don't want to let opportunities pass while I have the leverage. Please help

[Cynthia Hartley]

I would recommend that you take out a HELOC on the condo rather than refi. HELOC fees are less costly and the money can be tapped into again and again as it gets paid down. Besides, you only pay on the amount of the HELOC you use. If you have a HELOC for $200K, but only use $100K, you only make payments for the $100K.

Reserve a portion of the HELOC to put 20% down on your new residence so as to avoid PMI. If you have any credit card debt, use the HELOC to consolidate your credit card debt (don't acquire any more debt), which will increase your credit score and reduce the interest rate on your new home.

Then, if you have additional money from the HELOC, you could acquire another property.