Personal FHA or Family's HELOC?

[Ashek Islam]

I want to become a real estate investor. This is my story. So far 2019 has not been very kind in terms of looking for a 2 family home here in NYC.

I work as an engineer in construction. Stable job, stable income. I need a place of my own soon.

I've been pre-approved for $625k (can be pushed higher says the loan officer, depending on location and rental income). My intention was to "house hack" with rental income and put down 5% and pay PMI. I am also paying mortgage for my mothers 1 family which also has tenants paying rent (not reported). From my own research I've come to learn that it's quite possible for me to apply for a HELOC on her property for 550k+ (I do not live on this property). Naturally I sat down with my family and explained these options and they are comfortable with anything that I choose.

What did I want to do 7 months ago? 5% down + PMI, live ALMOST for free within 5 boroughs of NY and take it from there. Reality, good deals get scooped up too quick and overbid for the #'s to not make sense. This is also considering living in a basement or taking the risk renting it.

Current thoughts as of tonight. If I were to find a way to utilize this HELOC I "FEEL" I would find it much easier to purchase a home under market asking price (short sale, foreclosure, wholesalers, etc), fix it, refinance it, and pay back the HELOC. The "BRRR" strategy.

This has been an ongoing battle in my mind for quite some time now. I appreciate all those who have read this through to the end. All comments, opinions and thoughts no matter how harsh are welcome and highly appreciated.

Thank you Biggerpockets Community for providing an outlet for someone like me who knows nothing but wants to know everything.

[Jason Leavitt]

Hi, a little bit of additional information or clarification might help us point you in the right direction. Are you considering taking the first mortgage and then using the HELOC on top of that? Or just looking to have a credit line available so you can pay cash for a good deal? Also, $550k is a pretty large amount for a HELOC, how would the payments be structured, as they are often a percentage of the outstanding balance drawn, not a regular mortgage amortization schedule, so make sure the payment isn't going to be higher than you expect. Even if it's interest only the rate on the HELOC may be higher than what the first mortgage would be.

 Is the loan officer telling you they will consider rental income on your proposed purchase, even though there’s no past record confirming the amount or consistency?

 If the deals in your area are being scooped up fast, you may just need to watch the market very closely and act quickly when you see something good.  Or be willing to take something that’s a little bit more of a fixer-upper as that’s not what most people(non-investors) are looking for and may have less competition.  Though I understand appraisal values may be more difficult on a fixer with only a 5% down payment.  Good luck with whichever route you decide to take.