Hello bigger pockets! Seeking advice for 2nd & 3rd property acquisitions

[Jeremy G.]

Hello biggerpockets!

I'm looking for some advice!

History + current situation is as follows

so I've owned my 3 unit property for about 5 years now. I recieved a down payment grant of $5k and put 0% down out of pocket for an FHA mortgage, infact I recieved a few $checks$+keys at closing. My credit when I first got the mortgage was around 650 but I have gotten it up to around 760 today. Current mortgage balance is $159,000, current value is $300k-$350k. It has been the best financial decision I have ever made in my opinion and I want to own more apartments. I've lived in the 2 bedroom unit and rent out both of the 3 bedroom units. The mortgage is $1,500/month and I collect $1,500+$1,200=$2,700/mo in rents. I make aprox $60k-$70k per year at my w2 job. I have about 80k in other debts not counting the mortgage which include: vehicles, student loans, credit cards and a roof that I just financed for 0% interest for 12 months.

I absolutely hate living in an apartment. So i am very eager to purchase a single family home, however I also want to buy another apartment building. Im trying to figure out the best course of action to take to accomplish both.. there is a 5 unit property that i am extremely interested in but am unsure of what directions to take.. my mortgage interest is 5.25% if i cash-out-refinance my interest rate will go up to 7+%. Ive been looking at Helocs and home equity loans to borrow approximately $100k-$140k, consolidate the 80k worth of misc. Debt and use the rest for a down payment on a DSCR loan on the 5 unit property im looking at, then waiting a few months or more and trying to get either a conventional mortgage or another FHA loan to purchase a single family property to move into then rent out the 2 bedroom unit I currently occupy. So I would then have 8 apartments hopefully fully occupied.

Am i dreaming? Or does this sound reasonable and possible? Bad idea? Good idea? Am I missing anything? Are there any other options I should look into?

I was thinking I should lock in a Heloc now even though interest rates are so high, before property prices drop, because if I wait till property values plummet I won't have any equity.

I've read mixed information regarding dscr mortgages, some say equity lines and loans can be used for down payments some info says they can't. I have yet to speak to any lenders regarding the situation because I'm the type of person that wants to have as much information as possible before I jump into things and make a fool out of my self because of ignorance. Which is why I'm coming here after doing a ton of searching on the web.

also, it is thanks to bigger pockets that I found out about house hacking and the main source of information that helped me decide to go this route. So thank you biggerpockets!

[Lawrence Potts]

Hey @Jeremy G.! Congratulations on the current success you’ve earned, that’s awesome 👏 we currently house hack a 4plex and I agree, it’s been an incredible and life changing choice.

You have a lot of equity in your primary residence right now. Even if you didn't use it immediately, I'd lock in a HELOC. Typically you don't pay until you draw from it, you just have maintenance fees which are very minimal. It's all dependent on who you borrow through and how much you borrow against.

You can use your equity as a down payment! The consideration is how much it hurts your DTI. Your rental income is helpful but they'll look at all of your debt too. Something to think about. I highly suggest speaking with your lender about this situation. I had a BP member use a HELOC on their home to buy another home up in Portland. Definitely doable.

You can only have one active FHA loan at a time. So you would need to refinance your current place into a conventional to use it again. Otherwise you'd need to use a conventional loan for the next home.

DSCR loans are common on the commercial multifamily side (anything over 4 units). They'll consider you as a person but overall they are looking at the performance of the property to determine lendability. I think you'd be fine doing both in one year but if not, worst case scenario is you hang tight and buy the apartment and wait until you can buy the SFR for yourself down the road, or vice versa. I'd talk to a lender though to see how that impacts you. But I'd say do the apartment first if you can. That extra income could boost your buying power down the road. Plus you can only get a HELOC on a primary residence so lock it in while you're still in your first place.

Hope that helps!