Turning a Primary Residence into 40 Units w Amy Arata

[Mindy Jensen]

Plenty of people can purchase a house to live in. But how can you leverage that single home into many more real estate deals—enough to achieve financial independence? On today’s episode of The BiggerPockets Podcast we sit down with Amy Arata, a real estate investor and former molecular geneticist who shares how she eventually turned a live-in flip into 40 rental units. Don’t miss Amy’s incredible “people boxes” advice—as it could change the direction of your real estate ambitions forever.

Listen here or on your favorite podcast app.

[Amy A.]

@Devon Carlock Yes, you do have to qualify for the HELOC based on your debt to income ratio, credit score, and appraisal. You also get a better rate if it's your primary residence. Also, don't forget that if you rent your house for more than 3 of the last 5 years that you won't qualify for the tax exclusion available for primary residence!

I don't know if I was clear in the podcast about how I utilized HELOCs and commercial financing.  Honestly, I was expecting them to ask me more about managing rental properties and all of my crazy tenant stories!

We used the HELOC on our home exclusively for purchasing flip properties. That's because we didn't want the HELOC tied up in one property forever. The profits from the flips became the down payments for the commercial loans we used to purchase 5+ family properties. These loans are fixed for 5 years and adjustable thereafter.

Once my business was established and I had 2 years of tax returns to prove my rental income, I was able to purchase some 4 unit properties with 30 year fixed rates.   Also, keep in mind that the underwriters add depreciation back in, so even if you have a tax loss on a property they may count it as income.  If my husband or I had regular jobs, we would have qualified for 30 year fixed mortgages much sooner.

One point to keep in mind is that my husband had a good job when we qualified for the HELOC. Keep your job and save up until your real estate business is established! He had the steady job and I was able to manage our projects and find deals and tenants. Once the rental income was dependable, my husband was able to quit his very stressful job and start his own engineering consulting business. At that point, we knew we would be okay financially regardless of how his business did. The rental income gave him the freedom to take the risk.

LOL, everybody thought it was a midlife crisis when my husband quit his job!  We had actually been building up the "Free Mike" fund for some time.  It really wasn't about the money for me - it was about saving my husband's health and happiness and allowing him to enjoy our children before they grow up and move away.