Is This Plan Financially Feasible? Northeast Multi-Family, then Move South?

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Is This Plan Financially Feasible? Northeast Multi-Family, then Move South?

John Winters
Member since 2021 · 18 posts · 5 votes

Greetings BP ~

I am hoping to receive some feedback on the financial feasibility of this plan and/or some tips to improve it.  Thanks in advance.

*I currently live in the Northeast (U.S.).  I plan to purchase a primary residence, multi-family home (2-5 units, 'house-hack').  It will cost less than $150,000 and will need moderate renovation work.

*Soon after, I will be moving to the South, where I will purchase a relatively moderate-priced home (less than $350,000), likely a single-family, possibly a duplex.

~ I will most likely purchase the first home (multi-family) using a bridge-DSCR loan combo or a FHA203K (3.5-20% down). I would like to do the renovation work myself and hire skilled tradespeople when needed. The rental income from the first home will pay for the mortgage/monthly costs. THEN, I plan to purchase the second home using a FHA or conventional loan (3%-5% down), for which I will likely pay the monthly cost out-of-pocket, maybe with some rental income support if it is a duplex.


My concern is, I do not want to spend my savings or weigh down my debt-to-income ratio so much so that I cannot qualify for and pay the down payment and closing for the lending on the second home.

Questions: 

- With the first home being multi-family, 75% of the rental income (or potential rental income initially) will relatively either maintain or boost my debt-to-income ratio from lenders' perspectives, right?  Again, I do not want buying the multi-family home to block me from accessing lending for the second home when I move.

- Does anyone see any flaws or can offer some improvements/considerations to the financing strategy of this plan? It has BRRRR aspects to it. (For example, IF I was able to purchase the first home (multi-family) outright, paid-in-full, then use a HELOC to pay for the down payment and closing costs for the second home, would that be a smarter approach?)

- Will lenders likely make me wait more than 1-6 months from closing on my multi-family, to approving lending for the second home? (My credit scores are solid.)

Thank you in advance for any feedback. I appreciate it.


john

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Obed Calixte
Real Estate Agent · St Petersburg, FL · Member since 2019 · 321 posts · 182 votes
1y

For the first purchase- the home can not be your primary if you intend to use a DSCR loan. DSCR/hard money are non owner occupy loans.

If you decide to do FHA203K for the first home - a 203K consultant/inspector will be required for the standard 203k loan, you will unlikely be able to serve as GC and you sign a 1 year occupany affidavit.

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  • Dominic Mazzarella
    Investor · Hendersonville, NC · Member since 2016 · 498 posts · 286 votes
    1y
    Quote from @John Winters:

    Greetings BP ~

    I am hoping to receive some feedback on the financial feasibility of this plan and/or some tips to improve it.  Thanks in advance.

    *I currently live in the Northeast (U.S.).  I plan to purchase a primary residence, multi-family home (2-5 units, 'house-hack').  It will cost less than $150,000 and will need moderate renovation work.

    *Soon after, I will be moving to the South, where I will purchase a relatively moderate-priced home (less than $350,000), likely a single-family, possibly a duplex.

    ~ I will most likely purchase the first home (multi-family) using a bridge-DSCR loan combo or a FHA203K (3.5-20% down). I would like to do the renovation work myself and hire skilled tradespeople when needed. The rental income from the first home will pay for the mortgage/monthly costs. THEN, I plan to purchase the second home using a FHA or conventional loan (3%-5% down), for which I will likely pay the monthly cost out-of-pocket, maybe with some rental income support if it is a duplex.


    My concern is, I do not want to spend my savings or weigh down my debt-to-income ratio so much so that I cannot qualify for and pay the down payment and closing for the lending on the second home.

    Questions: 

    - With the first home being multi-family, 75% of the rental income (or potential rental income initially) will relatively either maintain or boost my debt-to-income ratio from lenders' perspectives, right?  Again, I do not want buying the multi-family home to block me from accessing lending for the second home when I move.

    - Does anyone see any flaws or can offer some improvements/considerations to the financing strategy of this plan? It has BRRRR aspects to it. (For example, IF I was able to purchase the first home (multi-family) outright, paid-in-full, then use a HELOC to pay for the down payment and closing costs for the second home, would that be a smarter approach?)

    - Will lenders likely make me wait more than 1-6 months from closing on my multi-family, to approving lending for the second home? (My credit scores are solid.)

    Thank you in advance for any feedback. I appreciate it.


    john



    Your plan seems well-thought-out, but I'd keep a few things in mind. For the multi-family, lenders typically count about 75% of projected rental income toward your debt-to-income ratio, which should help if the property is cash-flowing. However, financing the second property could be tricky, especially if the first purchase affects your liquidity or DTI too much. Using a HELOC for the down payment on the second home might be an option, but lenders may require you to wait a few months post-closing on the multi-family before approving new loans.

    The BRRRR-style approach could work if you can renovate and refinance quickly, but make sure the timeline aligns with your lender's requirements. If your credit is solid, you might also look into portfolio loans or DSCR loans, which are often more flexible for investors with multiple properties.


    0Reply
  • Obed Calixte
    Real Estate Agent · St Petersburg, FL · Member since 2019 · 321 posts · 182 votes
    1y

    For the first purchase- the home can not be your primary if you intend to use a DSCR loan. DSCR/hard money are non owner occupy loans.

    If you decide to do FHA203K for the first home - a 203K consultant/inspector will be required for the standard 203k loan, you will unlikely be able to serve as GC and you sign a 1 year occupany affidavit.

    1Reply
  • John Winters
    OP
    Member since 2021 · 18 posts · 5 votes
    1y

    Dominic Mazzarella & Obed Calixte ~

    Thank you both for sharing some feedback.  I really appreciate it.  It's been a few days; please pardon my delay in responding.  

    Dominic, I agree with your cautions. I'll check around with some lenders to see what they share about their comfort with the timeline - whether HELOC or not.

    Obed, YES, that's right.  I definitely forgot those important details.  Thank you.  I guess I could do some work-arounds -- maybe reserve one unit in the first purchase for use as an AirBnb, and reserve my own time in it when needed - instead of claiming it as a primary.

    Are either of you (or anyone) familiar with a finance product/loan that will allow me to purchase under $150,000 (w/ strong credit) and do much of my own work and live-in a portion as a primary residence?  

    Thanks again to you both for your feedback.  

    0Reply
  • Dominic Mazzarella
    Investor · Hendersonville, NC · Member since 2016 · 498 posts · 286 votes
    1y
    Quote from @John Winters:

    Dominic Mazzarella & Obed Calixte ~

    Thank you both for sharing some feedback.  I really appreciate it.  It's been a few days; please pardon my delay in responding.  

    Dominic, I agree with your cautions. I'll check around with some lenders to see what they share about their comfort with the timeline - whether HELOC or not.

    Obed, YES, that's right.  I definitely forgot those important details.  Thank you.  I guess I could do some work-arounds -- maybe reserve one unit in the first purchase for use as an AirBnb, and reserve my own time in it when needed - instead of claiming it as a primary.

    Are either of you (or anyone) familiar with a finance product/loan that will allow me to purchase under $150,000 (w/ strong credit) and do much of my own work and live-in a portion as a primary residence?  

    Thanks again to you both for your feedback.  


     Not off the top of my head, sorry.

    0Reply
  • John Winters
    OP
    Member since 2021 · 18 posts · 5 votes
    1y

    No problem; thanks again for sharing.  I appreciate it.  

    0Reply
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