24 yr old from the Suburbs of Philadelphia

[Robert Hytha]

Hello BP!

I'm coming to you all for help, but first - let me introduce myself.

My name is Rob, I'm a marketing grad born, raised and now investing in the suburbs of Philadelphia.

In my Junior year at Eastern University I met an entrepreneur name Joe, a guest speaker in a business course. Along with his partner Tom, they started a mortgage company buying and working out resolutions for distressed mortgage borrowers. I began an internship as soon as I could and now manage the firm's trading desk as the national director of sales.

2014 has been awesome! I started a consulting company in the beginning of the year. Although I still live with my parents, I bought my first house shortly before my 24th birthday! I have a few other ventures and projects in the works - the following of which I need your advice.

My first house is a 1750 sq foot, 4 bedroom twin in a small former steel town not too far from the city. It was occupied when I purchased for $130k with $150k appraisal. Tenants are paying $1200. $1030 p&i on my 15 year at 3.75%. The lease expired this month and they've signed a renewal for 2 years at $1250 then $1300.

Here's where it gets good!! The other half of this twin is a beautiful property and much better than my side. In the early 1900s two brothers owned the property and divided the parcels unevenly and the other side has a 5 car garage and 8,000+ sq ft lot which sports fruit trees and an old grape vine.

I got in touch with the owner of this fine piece of RE in June and worked out a sweet deal - $190k lease option (sublet allowable), $2500 down and $1400 per month with $400 deducted from the price.

Within 24 hrs of signing this lease I had a couple of tenants on a 1-year at $1600. Their agreement includes 1 of the garages and I'm working on renting the other 4... unless!

Here's the dream - in order to move out of my parents house, I want to rip the roof off this garage and build a home for myself. I'm imagining a 1000 sq ft second story loft apartment (balcony, spiral stair to the garage, etc).

Now, how do I do it?

The issue here is not the construction of the property (although I would love some input on the design and features to include!) - I'm looking for some guidance on financing this project in the best way.

I don't have to execute on my option to buy until next year (when the lease will renew anyway) and it's doubtful I will pass underwriting for a second loan this year (W9 and LLC income have less than a year of history).

Here's one option - build the loft in the next 9 months with borrowed cash from my parents HELOC. Move in and get an owner-occupied 30 year to buy the improved house. Mortgage rates might increase and I suppose there's a minor risk of something happening with my lease (although I trust my counter party) but since I don't hold title yet it's a factor.

Another plan would be to find a lender who can underwrite this deal ASAP and refi next year. My financials are solid but the inconsistency in the source of income may be a hurdle. Also, I will definitely be short on the downpayment (tenant occupied - 25%) so I would have to tap my parents HELOC anyway.

I plan on continuing to invest in real estate in my town so a final option might be to secure a business line of credit to buy this home first and continue to look for other deals in my area. 

How should I proceed? What else should I consider? If I missed anything let me know and I will try and clarify!

thanks for reading!! and please forgive me if this post belong in another forum, admins - please advise!