What would you do in my scenario. Looking to purchase second property as investment.

[Raul Fernandez Jr]

Hi Community,

I am in a position where I can tap into the equity of my primary home to purchase a second investment property. I’m seeking guidance on how best to approach this situation and would appreciate your thoughts on what you would do if you were in my shoes.

Here are the details:

• My current home loan is $242,000, and the property is estimated to be worth approximately $420,000 (± $5,000).
• I am locked into a 30-year loan with a 2.8% interest rate, so refinancing doesn't make sense given the current high-interest rates.
• The property is rented out for $3,200 per month, while my mortgage is $2,100, and the HOA fee is $268.

I explored the option of taking out a second mortgage. Rocket Mortgage (my current lender) quoted me $100,000 for a 20-year loan at a 9% interest rate, resulting in a monthly payment of around $1,000. My plan was to use the funds from this second mortgage as a down payment (20–25%) for the next investment property with a DSCR loan.

Are there other approaches I should consider? What would you do if you were in this situation? Any guidance would be greatly appreciated!

[Tim Delaney]

That HE loan would make you cash flow negative on the first property, especially considering you are not even factoring in any repairs, maintenance, vacancy or management. Personally I don’t like being cash flow negative on properties, but I guess if you have an amazing W2 and a good reserve account and the new property is going to cash flow really well then maybe consider it. I would also only do this if both properties have solid appreciation potential.

If it was me, I'd consider trying to get a HELOC on the first property and use the funds for a flip or a BRRRR so I could pay back the line of credit within 6 months and then go do it again.