Hey everyone! I'm not new to the forum, been reading and gleaning from the expertise for a while, but this is my first topic thread. I figured it's time to jump into the conversation!
My wife and I just bought our second home. Our first is rented and has a positive cash flow, the second we bought because it had an unfinished basement (which I'm about to complete with 2 beds 1 bath) and we want to rent out the basement, which has a separate entrance, on a nightly basis using VRBO, AIRBB, Craiglist, etc. while we also remodel the upstairs. The plan is to eventually sell the house after the remodel is complete and after we've been there at least years (to satisfy the 2 of 5, no capital gains tax requirement). However, upon completion of the remodel and before we consider selling I'd like to cash out refi or get a HELOC to shop for other investment properties. Given our current income (my wife is now self employed/growing her business, so it's smaller right now than it used to be) we probably couldn't qualify for traditional financing on a third property if we were only considering our 2nd home as our primary residence. Would the income from the basement rental count against our mortgage for the whole house, basically moving it into the rental category as far as financing goes? How much rental history would I have to show, typically? Anyone got a creative workaround they've employed in the past?
Thanks!