Second Property Financing

[Dan Gengler]

Hi All,

I'm in need of some advice on how to finance my second property.

About 1.5 years ago, my wife and I closed on a duplex in a suburb of Milwaukee, WI using FHA, 30 year fixed financing. I am currently living in half and am renting out the other half. We currently owe $249K and the appraisal that we received when we bought the house was for $268K. When we moved in, we put about $30K into the house in upgrades and renovations. We currently receive $1250/month on the side that is rented and are expecting to get about $1500 for the side we currently occupy when its rented.

We now want to look at purchasing our second property that we also plan to owner occupy.  We'll will have about $40K in cash to use when it comes time to purchase the second property (in about 6 months) and would be looking at another property in the $250K-$275K price range.

My question is, how should we go about financing this property as well as our first property so that its the most advantageous to us and our cash flow:

1. Should I just go for a traditional loan on property #2?

2. Should I try to refinance property #1 out of FHA prior to purchasing property #2?

3. Is there a way that I can bundle them into one loan so I can get rid of the PMI on loan #1?

For additional background, my wife and I both have W-2 jobs with a combined income of about $150K annually and near perfect credit.

Thanks,

Dan