I Don't Know Where to Go From Here...

[Vincent Pirrone]

Alright, I have a bit of a problem. I dont know where to go from here. I want to try to get into a BRRRR property. I currently live in a house with a basement that I converted into two units and i currently live in one. The other unit pays all of my mortgage except for about $200 per month. I just refinanced into a lower interest rate but still fha, so now my new mortgage is for $218,989 and on Redfin my house is said to be worth about $258,977. So, two things...

1. Should I get another single family house? I am looking at some houses today that could easily be turned into a duplex like I currently have and move into to take advantage of a low down payment, but the problem is that I was going to try to get a HELOC on my current house for 10k to cover the down payment, but the bank I talked to said the minimum they can do a line of credit for is 15k and my house doesnt have enough equity to let me pull out 15k at 90% ltv. So kinda at a dead end since I dont have 10k for a down payment any other way.

2. Should I build a guest house? I got lucky on my first deal that I'm in because its actually zoned to have two buildings on it. I have already talked to the zoning department for my area and confirmed that I can build a "guest house" if I have no intention to rent it out (but of course I do). So the construction costs for a 700sqft 2bd 1ba guest house would be about 75k and I talked to a bank about a construction loan and they said they can loan me up to 85% of the current value of the property + the construction costs. So that would be (258,977 + 75,000) × 85% = $283,880 So subtracting out my current mortgage ($218,989) and the construction costs (75,000) that leaves me short $10,109 so I would have to get an extra personal loan for 10k (the same 10k problem in the 1st part of this post) And if I did do this, after everything is set and done, I would need the property to appraise at least 327k in order to repay everything if I got a 90% ltv HELOC. Also, I wouldn't have enough to buy my next property after that either...

So as you can tell I am in a bit of a predicament. Any knowledge and advice would be very helpful. Please let me know if you have any ideas on what I should do. Thanks!

[Tamara Deering]

@Vincent Pirrone

So you are in the same spot as many people on BP, you want to get into a property with no money down.  So you can investigate the typical strategies, owner finance, sub tos, partners, etc.  But...given that you own a property and all but $200 a month is covered, I would actually spend some time working on gathering your down payment funds.  Start figuring out how you can save as much as possible as quickly as possible, maybe a side hustle or second job?  Check your expenses and get them in line, with virtually no housing expenses you should be able to save the down payment very quickly.  The importance of cash reserves is under-represented on BP but it is really a crucial piece of the investing strategy.  You are well on your way. Keep up the good work.