how do I acquire my next investment property?

[Amar Amar]

Hello,

I am in the process of buying a rental property(1) for $400k with all cash (needed to get the best deal). I'm funding this from HELOC on my primary. I will most likely get $450k in heloc. For the first 6 months, interest rate is 3.75% on heloc. I would like to buy another property (2) right after all this is done ( once I rent this out). What is the best way for me finance the next one ?

1. Get a mortgage on property (1) and use that for 20% down payment for property (2) and put the remaining back to heloc ? Do I have to wait for sometime , either to get mortgage (1) or mortgage (2)?  Is Rental lease agreement on property (1) good enough to include rental income while calculating debt-to-income ratio? 

2. Get mortgage on property(1) and use that to do cash only deal on property (2)  and secure mortgage on that later to pay back heloc ? 

I’m confused which way to go and if I will qualify. Appreciate Any suggestions/input . 

Thanks!

[Heith Reade]

Hey Amar, personally I would be in favor of using the cash out of property 1 to do an all cash deal on property 2 and then if need be you can use delayed financing on property 2 to payoff/down the HELOC. I say that because in general, when acquiring a property in cash you have more options regarding the property type, the state of repair the property may be in, and generally you'll have more negotiating power being all cash. As far as having to wait to take cash out of property 1, there are some specifics that come in to play as to whether or not you have to wait to get cash out of property 1. I suggest speaking with a lender regarding the specifics.