Advice on two funding scenarios for first multi-family

[Josh Ryan]

Hi,

My name is Josh and I've been listening to Bigger Pockets podcasts for years, but never actually had the courage to move forward with my first deal until I listened to the "Vacuum the Freakin' Truck" podcast this past weekend. I've had my eye on a two family unit in a small town in NH, so I made a call to the local real estate agent there and asked her how the rental market is and if she felt they could rent out successfully. She said there's always a need for good rental units and they literally only have one unit for rent in the entire town at the moment. The unit is two separate houses on the same property. One's a 4/2 and the other's a 3/2. I want to finance this first deal by either using the equity from my primary residence which is about $80,000 or selling my primary residence and clearing about $70,000 after closing costs. If I sell the primary residence, we would house hack and my family of 6 would live in the 4/2 and we would rent out the 3/2 and cover most, if not all, of the mortgage. The property appraises at about $250,000 according to Zillow and I'd like to offer $225,000 (he's asking $249,000) with 20% down which is $50,000 and would give me a mortgage of $175,000. That's instant equity of $75,000 even before the cosmetic rehab I'd like to do on the property. My PITI would be about $1650/month and the realtor thinks I could rent out the 3/2 for anywhere from $1400 to $1500/month. It needs cosmetic updating, but the structure is very solid, so I'd be willing to put a good $15,000 to $20,000 into both properties to bring them up to date and very desirable. This property would not pay me any amount per door initially as I would be doing this strictly for the equity so that I could refi the property in a year and pull cash out to allow me to fund my next deal. The second scenario is I refi my primary residence and pull about $80,000 out of the property and then start the clock all over again with another 30 year mortgage on my primary residence. I'm currently at 17 years left on the mortgage, but I bought it on a 19 year amortization schedule two years ago. My primary residence appraises at $266,000 and I currently owe $180,000 on it. If I refi back to a 30 year, I'd be adding $200 to my current mortgage. In this scenario, I would rehab the rental property and then rent out both the 4/2 and 3/2 for a total of about $2600/month coming in for rent. We'd be carrying two mortgages though, so that's why I'm putting this out there. Is the higher risk worth the reward? My mortgage on the rental would still be $1650/month like in the first scenario, but the rental on the second house would give us about $950/month back after paying the mortgage. I would then have to deduct another $200/month to make up for the higher mortgage on my primary residence which would actually put the net number for the rental units after the mortgage payment closer to $750/month. I understand I haven't included all of the expenses like capex, maintenance, snow removal, etc, but again, I'm only looking to make this first deal for the equity to allow us to fund our next BRRR deal a year or so later. I'm more interested in knowing if you would sell or refi your primary residence if you were looking to fund your first investment property.

Thanks in advance for your time,

Josh