All Forum Posts by: Justin Mespelt

Thanks guys. I knew the answer but just need to get over myself. I reached out to a bigger pockets recommended agent today, and started putting together a list of contractors to reach out to. 

Who needs sleep anyway?

TLDR: when using a primary residence HELOC as a down payment on an investment property, you are effectively financing the entire purchase. How can you ever cash flow at 100% DTV?

Longer story: my wife and I recently secured a HELOC with the goal of utilizing it to acquire rental properties. I realize the best method would be for us to BRRRR something, but that is daunting and the wife would prefer we get our first property the more traditional purchase way to prove out our methods and get our feet wet. We live in a high cost of living area, so we are forced to look out of state. The hang up comes when I run numbers on anything remotely close to rentable. I don't see how it's possible to cash flow on a property if you are borrowing the down payment.

I realize I’m just looking for affirmation that this is the reality. There just won’t be properties in any decent areas that can support this debt level, so the answer is to find something under market and rehab it. I know tons of people do exactly that. I’ve read the books, listened to the podcasts, dug through these forums, etc. It’s just so damn intimidating figuring out the first steps to doing this remote while working full time and raising kids. Etc. 

Am I missing something obvious here?

Feel free to tell me to just suck it up and start.  I probably need that :)

@Spencer Resnik I believe it’s a weird coding problem as it always follows the ampersand punctuation.

I'm in need of clarification as to what banks look at as income when calculating your DTI ratio, specifically for a primary residence HELOC. First, around 38% of my gross W2 income the last 2 years was earned working overtime. Will a bank take that into account as income, or is the ratio only looking at base pay? Secondly, for 4 years before last fall, my wife was self employed. Beginning last fall she is a substitute for multiple school districts. She works steadily, just not with any single employer or on a set schedule. That makes it almost impossible to verify income with less than a full years taxes to look at.

What front/back ratios are banks looking for when applying for a HELOC?

Thank you

I had the same problem, but attributed it to FHA appraisal more than just a lack of appraisers. I sold my home to an FHA buyer, they ordered their appraisal July 22. Finally got a guy on site August 21, and through a cavalcade of screw ups he finally completed his job September 6th with us closing today. On the other hand, the home I'm buying in Sandy had the appraisal completed and turned in in less than 10 days from ordering it.

No.  I went with a local broker.  

I'm sorry if I was not clear with my post.  This is an idea for my personal residence where me and my family will live. So input on finishes is one of the main points. This won't be an investment property for me, but would still benefit the partner I would work and purchase with. 

I have a random idea and need to be told the problems with it. Here it goes:

I have a 2-5 year timeframe to move to a local commuter community. I have a good chunk of equity in my current home (say $80k). I could get a HELOC giving me access to 80% (say $64k) The hair brained idea is to find the people that operate in that area in either wholesale or flipping, and try to partner with them once they find a property that makes sense numbers wise for him and is a good home for me. Is that too many layers of conflict? It would have to be a partnership with split risk, and obviously would need attorney sign off on everything. But the end goal would be for my partner to make good money, have access to my "private" funding, and for me to get a finished home below market that I had input in the finishes and build.

Now tell me I'm an idiot and why please. 

I've thought about that, however, the numbers don't look great as a rental. Current PITI payment is $1,150 with PMI, could refinance down to a bit above $1000. The best rent I could hope for would be $1,700. That's close to ok, but not cash flowing after saving for expenses, vacancy, etc.