Can I put a HELOC on an investment property? Plus general advice on this deal…

[Sean Haran]

Hello! I'm looking at a potential SFH property in Columbus. It's on a big lot (almost 1 acre) in the Innis Garden Village area. Off market. Asking 115k, it is a small house zoned as a 1-bed but looks like they've added at least 1 bedroom. Plus there's a big garage that could maybe be converted to an ADU or another bedroom in the future. It will need pretty much all the cosmetic stuff, but structural stuff seems not so bad from photos. I'd definitely offer with an inspection contingency.

ARV on a good quality rehab is 175k+, with some really solid comps to back that up.

Issue is that if I refi at 175k value I will be way into the negative cashflow, like a couple hundred dollars per month negative. It breaks even with a loan of like 100k-ish. (Quoted about 8.5% rate on a DSCR loan, and budgeting 10% of rents for capex, 9% for PM, and 5% each for vacancy and maintenance)

After-rehab rents would be about 1350-1500 based on comps. However down the line if we fully converted the garage and got the extra bedroom up to code we could get more, especially through section 8. (Not sure if getting the extra bedroom fully up to code would be within budget at first…)

So I could buy this thing, rehab it, and refi at a loan where I'm basically breaking even or cash flowing <$100/month, and I'd be leaving 30k at least in the deal. At that point I should have at least 75k of equity in the home. So my question is, can I take out a line of credit against that equity to help fund my next purchase, or can I not take a HELOC out on an out of state investment property?

Any advice is much appreciated!