Seeing Advice on split living space home

[Nat Love]

I have a split level home that I want to rent out. At the moment, it’s basically set up for two separate living spaces with separate entrances (the other level just lacks a kitchenette). 

The house is slightly outdated, needs some cosmetic improvements, but is definitely turn key ready. 

The home has no mortgage, full equity. I want to move into another home nearby, (I have a family and don’t want to share the home) but I’m worried that because home prices are so high here, I may be just breaking even when calculating my cash flow. 

The area is generally appreciating Year over year so the equity growth is good. 

Is it wise to take out a HELOC to renovate my current house to get a higher rent rate? Is it worth it to add a kitchenette to my current house to make it into a true separate living space?

Is it also wise to use a HELOC to put a down payment on the next house I want to move into, rinse and repeat? Or should I save for an FHA loan?


I do have a debt to income ratio of about 30% even before taking out the HELOC if that makes any difference. 

Thanks for any advice.

[Steven Goldman]

Nat Love: If the property is not legally permitted to be a two unit then I would not improve it to a two unit as it will not increase its appraised value for the purposes of financing. For financing purposes, if you can get approved for a fixed rate HELOC why not. You can use that fixed rate money to buy another property. If it is interest only then at some time you will want to start retiring the debt. HELOCS are usually less expensive to originate. Good luck and keep moving forward.