HELOC and my First Deal

[Ryan G.]

Howdy BP! My first real post involves, of course, a question. Thanks in advance for everyone’s input. I welcome it all, including angles I haven’t thought of or considered. This is my first deal(s) and my main concern is the financing structure. At the end of the day, we have to be in a position for a 2nd mortgage that will be our primary residence for the time being. I am looking for potential limitations, road bumps, etc.

Currently, we have over $80k in equity with our brick and mortar 3 bed/2 bath in a popular suburb of Houston. The house is appraised at $189k. Rental comps from $1600-$1800/mo. We also own two mobile home lots (37’ x 110’ ea.) with a small 2 bed/1 bath mobile on it. All of this is free and clear in a nice lakeside subdivision a little farther from Houston, but still an easy commute.

I want to take out a HELOC against the equity in the brick home. Move the 2/1 to a park nearby. Hunt down and buy two used 3/2 mobiles to place on the newly setup lots that the older mobile was on. Still with me? At last, I want to rent out the brick home. By my numbers, our equity position will go from $110k (including all property as they sit) to $86k (after deducting $50k to cover the HELOC). Each individual trailer in the lakeside community will be worth more than $40k and the older (1996) trailer in the park could go for $16,500 (owner finance) plus we will still have $30k in equity at the brick house. Seems like a good move considering it will all cash-flow $2,000/mo. after the mortgage on the brick house (which includes the new HELOC).

Question? What should I expect when applying for a new mortgage, since once everything is in place, I will be homeless and in need of a house. I am looking at property in the same price range, capping at $220k. Any ideas or advice? Thanks again!