Hi, first post ever here and I'm looking for some advice and feedback on a deal I'm trying to work out. I hope your collective experience helps.
Background
My wife and I house hacked back in 2010 (not realizing this site existed or the true value of the choice back then). Through MMM, I learned of bigger pockets and appropriate analysis of a property. I started reading the blog, etc. Turns out our first real estate investment (wouldn't have used that term then) was pretty solid by dumb luck. It was FHA insured and continues to be financed at 4.5% 30 yr fixed. I suspect it is worth about $125k and I owe 108k. It grosses $1875 a month in rent.
By and by, life happened. My wife's grandparents passed in 2011 and their home was for sale by the estate. Due to nostalgia and family, we bought the house using a conventional loan. We received a gift of equity, in other words called the value of the home $105k but purchased it as $84k, giving a 20% down pmt with no money actually down. 30 year fixed, 4%. I actually believe the home is worth about 120k. I owe 76k. Got in there 6/2012 after alk paperwork. Another good break and we continue to rent out the original two family. All is well.
Along comes a beautiful two family home for sale, as well as my questions. It's a home and location we'd legitimately love to be in.
I'm hoping to get it for about $225k. There is a tenant in lease on the one side for $1250 per month. My family of 4 would like to reside in the other half. We also intend to keep both other properties and foresee renting the single family at $1000 per month.
The question is the financing. I began shopping around with local banks and credit unions in upstate NY, as well as Quicken online. I don't have piles of cash, perhaps 10k. I do have a decent retirement I can borrow against if necessary. I also appear to have some equity in my residence. However, at a minimum, I'm told a bank won't touch a two family for less than 15% down. That plus closing costs and reserve funds of 6 months PITI per property (2 months PITI on the new). If I went that direction, I figure I'm probably spending 45k to close plus need 13k in reserves for the properties. It's a lot and I was feeling discouraged. Of course if anyone has feedback on this part, I'd love to hear it.
Then I realized I might be able to engineer a more creative solution. The seller wants to close after his son graduates in June, so I have some time. I thought maybe I can get a HELOC on my current place.
Perhaps about 19k = (120k value x 80% ltv)-76k outstanding).
Maybe I can use those funds to refinance my two family. I figure if I need 75% ltv and if it's worth about 125k, I'd need to pay down about 15k to get my 108k balance to 93k a refinance level. I don't know what the investment refi rates are on a two family property, but my current rate is 4.5%
If I did that refi, I'd no longer be FHA insured on a mortgage. I thought that could then free me up to get a new FHA, as we'd owner occupy, thus avoiding the dramatic up front costs.
Can this be done? Are there sticking points? Suggestions on how to succeed? Another angle entirely? Please let me know. I'm happy to clarify on other details as necessary.
Thanks if you stuck with me,
Bill
