Newbie looking for guidance

[Randy Adams]

Hey everyone! So little intro here - recently got inspired to go further in real estate after listening to Biggerpockets podcasts and reading these forums. I am very grateful for all the people and knowledge here. My primary residence was bought using minimum down FHA in 2019 near the Jersey Shore and I immediately moved friends in to offset my mortgage/housing costs. I am now thinking of financing another property - my first rental property.

However, I am unsure if it is a good move for me right now and if so which approach would be best to take as well as which area to invest as there are so many factors. Between putting 20/25% down as a straight rental or putting minimum down using conventional and moving into it. As far as multi unit homes, I'm not seeing many in my price range in my area. Then the balancing of DTI as well. I know that roomies aka "boarder income" isn't counted toward DTI. In the end, the numbers have to make sense and cash flow in order for it to be worth doing.

I have a good amount of equity in the house since values have gone up which prompts the idea of opening a heloc as a tool for financing. A credit union I’ve contacted said I could get up to 43k from that. I make about 56k a year and have 10k in cash. I am open to any and all ideas! 

[Michael Zane]

Hey @Randy Adams, love the ambition! No offense at all, but you'll probably hit the DTI ceiling pretty quickly if you look to finance a second property with a traditional lender. Some of them will count a portion of the rent as income during the underwriting process, but often it's not a deciding factor. You might even run into a similar issue with a HELOC. If you can find a great deal, you might entice a private lender or one of the lenders that looks only at the deal itself (you can find a couple listed on BP - mofin, etc.).

Regarding location, I like the idea of getting started by concentrating on markets you know well.  It doesn't mean there will be good deals right now, but it's better to be patient in a market you know vs. looking somewhere else that you're unfamiliar with.  Make it a habit to check the listings each day in your target market.  And of course, find a great, investor-friendly agent in that area =)