Buying Multiplex for Investment using home equity loan (Chicago, Normal: real estate, renters)

[majka]

This is possible and quick way- We have an option of buying a multiplex (4 unit) about 450k using our home equity loan money as a down payment. Or we can go longer way, and buy single family home to flip to earn for down payment for future multiplex. The second option would take a long time because we could only go 2 houses per year to flip, and I assume we need about 5 houses to flip to earn good down payment.

I wait for a word of wisdom from experienced real estate people.
Thanks in advance!

[damba]

Originally Posted by majka

This is possible and quick way- We have an option of buying a multiplex (4 unit) about 450k using our home equity loan money as a down payment. Or we can go longer way, and buy single family home to flip to earn for down payment for future multiplex. The second option would take a long time because we could only go 2 houses per year to flip, and I assume we need about 5 houses to flip to earn good down payment.

I wait for a word of wisdom from experienced real estate people.
Thanks in advance!

There is no 'one size fits all'. Way too many variables involved for anyone to provide an authoritative answer.
How much equity do you have in your current home?

[majka]

it will be 100k
I just need to get an idea what's better/safer option flip a house for down payment vs home equity loan for down payment

[Listener2307]

Originally Posted by majka

This is possible and quick way- We have an option of buying a multiplex (4 unit) about 450k using our home equity loan money as a down payment. Or we can go longer way, and buy single family home to flip to earn for down payment for future multiplex. The second option would take a long time because we could only go 2 houses per year to flip, and I assume we need about 5 houses to flip to earn good down payment.

I wait for a word of wisdom from experienced real estate people.
Thanks in advance!

Don't borrow the down payment.
Don't flip what you buy. Buy good properties and keep them. It is horrendously expensive to sell real estate.

[damba]

Originally Posted by Listener2307

Don't borrow the down payment.
Don't flip what you buy. Buy good properties and keep them. It is horrendously expensive to sell real estate.

Therein lies the rub. In Chicago at least, a 'good' property will often be out of reach price-wise.

OTOH, who said they wouldn't necessarily keep their multi-unit(?)

[majka]

I sad as a second option to flip few single properties in order to make money for down payment to buy multi property (4 units) or use my current home equity loan to buy a multiunit that is a actual goal in whole situation.

[damba]

Originally Posted by majka

I sad as a second option to flip few single properties in order to make money for down payment to buy multi property (4 units) or use my current home equity loan to buy a multiunit that is a actual goal in whole situation.

Nonetheless, you would be the sole person who can determine what constitutes an acceptable amount of financial risk or burden until that property is providing sufficient cashflow. Nobody here can do anything besides speculate.

OTOH, this 'path' is what many other Polish immigrants have chosen to improve their financial situation in Chicago.

[majka]

Otoh ???

[damba]

Originally Posted by majka

Otoh ???

https://www.google.com/search?q=otoh

[chet everett]

... lots of people do use FHA financing for a multi-family property. There have been generations of folks that had nice three flats.

There are also plenty of people who've partnered with a higher income friend / business associate or relative to have a "team effort" that combines to make things work. As long there is agreement about risks & rewards this can be effective.

Borrowing to meet down payment requirements is NOT something any successful investor should do -- fact is that sort of thing has WIPED OUT many would-be investors faster than anything. Many lenders who offer HELOCs specifically prohibit the proceeds to be used for purchasing real estate and doing so can trigger a whole range of violations that could result in losing your home and even criminal charges -- you'd really be heading in a direction that is not good!

There are always some opportunities that take a bit more WORK to be profitable: from gross homes where the previous tenants left waste to rot to situations where lack of maintence will nescessitate some more repairs those sorts of properties, in areas with good demand, can justify doing the extra steps needed to make the deal profitable.

Frankly, if you can head out to areas where the mix of supply & demand makes for better opportunity that is almost certainly worth your time and effort. There are almost always places around colleges that be bought at a modest price and rented out easily. Whether you are driving to DeKalb, Normal, Chambana, West Lafayette, Madison, Milwaukee, East Lansing or Iowa City you'll likely find places that are more affordable and potentially more profitable than stuff locally. Don't spend your money now, kids probably have leases lined up for the fall. If you go on a little "scouting trip " now and get a sense for where your budget is most likely to get the best return you can start shopping with more urgency in the winter & spring, ideally you will have a nice property to offer by next summer... The population of college towns is not all crazy frat boys --- many folks rent because they are in grad school, there are faculty who are not permenant, lots of folks associated with area hospitals / clinics tend to be testing the waters before purchasing -- all good solid renters who will be glad to rent for a fair price and no hassles!

The hordes of kids flocking to Chicago often attended colleges in the Midwest and the investment potential of many such areas can be a good way to avoid the frenzy of booming areas in Chicago.