Newbie: Creative Financing

[Daniel Colon]

Hi! Thanks for taking the time to read my post and any advice is greatly appreciated!

My wife and I are newbie investors in Southern California. We are looking into investing by buying Single and Multi-Family Residences through the BRRRR strategy. My mom would likely to be our first client. This is great but nervous because I want to do right by my mom.

This is the situation. My mom lives in an attached 2-story 3 bedroom, 2 1/2 bath townhome. She has about $130k in equity. The townhome no longer works for her because of the stairs so she would like to get into a single-story home.

I spoke with a lender and he advised us to do a cash out non-owner-occupied refinance for my mom’s home. My mom would then use that cash to buy another home as owner occupied and I would co-sign the second property. Then, the townhome I would rent out and manage that property. This has me a bit perplexed because my wife and I want to be the investor and my mom doesn’t want a second property under her name. She does need a home to stay under her name so she can continue claiming taxes at the end of the year.

My thoughts were to have my mom do a refinance so she can lower her interest rate from 5.5 then do a HELOC. HELOC would be for the money down on the second property my wife and I would buy, and rehab then rent it to my mom. The townhome we would rent out and I would manage it.

Any advice, feedback and/or suggestions on options we have are greatly appreciated.