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Updated almost 8 years ago,
100% equity in fixer upper - next steps?
My husband and I purchased a potential rental for 26K cash. It does not have a mortgage and was fixer-upper and needed a ton of work. We were not able to obtain financing for the house due to its condition, so we took out no interest credit cards to complete all of the work. We essentially stripped the house down to studs and replaced everything - new HVAC, new electrical, new plumbing, new roof, drywall, carpet, tile, kitchen, bathroom, you name it! My husband quit his job to renovate the home, so we didn't pay for any labor and instead just put all of the materials on the credit cards. We have about $20K in CC split between him and I.
The house was completed this past week and is ready for renting. We have several people interested in renting for $1250/month but do not have any secured commitments. My credit card no interest period will expire in June, so I need to start unloading those items. I am also looking at purchasing the next rental to do it all again. As I mentioned, my husband is doing all of the work as his job, so we are not afraid of sweat equity. Most of the properties we look at require some kind of cash purchase (in whole or in part). I am not sure what makes the most sense for moving forward: 1) getting some kind of a home loan on the rental to pay off all of the credit cards or 2) getting new ccs with periods for no interest and transferring the current outstanding balance to those new cards, then getting a home equity type of loan on the rental to pay for a new property (down payment on a new mortgage or cash)?
The home is in both our names, and is currently considered my husband's primary residence. I've been told we should transfer the property into an LLC, but I have read a lot about it and am concerned that if we go that route we will not be able to obtain financing as we wouldn't have any history of income for that property. Would this matter much if we own the home 100%? Or is it better to obtain a loan for the house as his primary residence to pay off the CC and then do a cash out refinance when we find the next rental property to purchase? Since he quit his job to do this full time, i don't have any proof of his income for this past year.
Essentially, I am looking for some advice on how to structure this organization, and what financial moves make the most sense. Any advice is truly appreciated.