Valued Contributor
Lady_Scarlet
Posts: 2,385
Registered: ‎09-10-2007
Re: Effect of Credit - HELOC or Second Mortgage
I would recommend against gambling your home on an investment property,  In this market you have no clue as to when the rehab property will sell - it could be days from the time you place it for sale or a year.  In the meantime you are carrying a large mortgage with little or no equity in your home.
 
Besides, if you take the cash from the investment property you will have to pay taxes on it (talk with a tax specialist that deals with Starkers).  Now, you can defer the tax if you buy another investment property with your same friend and follow these rules: buy up, mortgage up and spend all the cash.
 
Oh, and to qualify for a starker you must hold for at least ONE tax return at a minimum, but better to be safe and hold for 1 year and 1 day to qual.  Attorney differ on this and there is no firm IRS ruling.
 
Starkers are a little known (by the general public) avenue to defer taxes - and you can convert an investment property to personal use/primary residence (must stay there 5 years to qual for the250/500K exemption).
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