Its simply like a whole separate loan and I'm using the equity in the home to secure it, kind of like using it as collateral?  

It's a whole lot slower moving than LA, and industry is more concentrated.Just make sure you're buying in a decent area, and if you leave yourself some room for rents and valuations to go down you should be fine.

The lack of cashflow pretty much kills the deal, because the whole project becomes based on potential revenue of the flip... while the cashflow will not increase for any other investors as well, so it could become hard to sell at a decent price.

A top selling agent in the metropolitan Indianapolis area for the last 5 years.Love working with buyers and sellers to help their dreams to come true.Goal to achieve customer satisfaction at the highest level.

You may come across that name sometime...For my appreciation needs, I would be looking to buy under intrinsic market value in the first place, achieving FORCED appreciation from the get go. 

I am after the $100k-150k homes and do some light rehab and hope to rent out for 1%-1.5% of purchase price to achieve 1% or 1.5% rule.  

I plan to pay down most of the HELOC, turn the whole property into a rental, then move onto the next one.

I pushed back pretty hard saying I am ready to walk on the whole deal if HUD doesn't cover those.

By the numbers, the cashflow may look better, but the turnover tends to be higher and you have a whole new set of CapEx expenses that have to be supported entirely by that one likely lower-rent unit (it needs its own water heater, HVAC, roof, etc.)If the property isn't a great deal without the garage unit, it won't be a great deal with the garage unit.

Just a small warning:In some areas, as soon as you pull a permit, all systems in the whole house must then be brought to code.