How do I use the equity of my house to invest in a rental property?

Answer 1

Hi djc,

Please review your plan carefully. Just because you can do something doesn't mean you should. Do you have ample income to cover this equity line of credit? Can you easily cover the current mtg payment, the new equity payment and the new mortgage on the investment property? Do you then have remodel money set aside to invest in fixing up the rental?
You will need to have all of this money available.
some people go out and buy an investment property without enough money to cover their expenses.
Then they buy a property and start fixing and then discover that they've gotten into a bind. Now the property won't earn good rent. So they have depleted their savings, taken out two new loans and the thing is still not fixed and the tenant keeps complaining that things need repair and pays later and later every month. Eventually the tenant must be evicted for non payment and even the eviction costs money.
To be a real estate investor one must have plenty of money for covering unexpected costs. If you do, then welcome and good luck. If you think you'll do some on a shoestring. Don't.

best of luck,

Answer 2

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Answer 3

Don't get an equity loan. Get an equity line of Credit. That way you only have to pay back what you borrow and nothing more when you don't need to.

Use the credit sparingly. Look for properties with a positive cash flow and owner financing. Look for motivated sellers who will sell the properties for under market value. Sometimes I found properties other people were scared of because of structural problems which I understood and new how to correct. Those you can pick up for a song if you know what you are doing and fix the problem and sell for way more money.

Use the equity line of credit only for downpayment, closing costs and renovations.

It is almost a good time to get into what you are looking to get into. Long term it is great but you have to weather up and down cycles. In the US there is a down cycle going on. Especially in Florida now.

If you are just looking to catch one up cycle wait till the Federal Government cuts interest rates 2x and then start looking for bargains.

Answer 4

Go to a lender and get an equity loan. Nobody is going to ask what you're doing with the money.

Once you have the money, you can make your life much easier by waiting until it's been sitting in your bank account for two full statements. (Deposit on February 15, it will show going in on the February statement. Wait for March and April statements and it will appear in the account for the full time.)

Use the money like you would any other funds to invest. Remember, the payment on the equity loan will be used in your list of debts.

Answer 5

CJKatl has the right idea. I'm a mortgage loan officer and do not recommend the HELOC (home equity line of credit) for two reasons:

1. The interest rate is higher. HELOCs are adjustable-rate mortgages (ARMs), usually priced at prime + 1. They also adjust MONTHLY. Currently the prime rate is 8.25%. If you have decent credit, you can usually get a fixed-rate cash-out loan for less than 7%.

2. HELOCs have lower loan-to-values (LTV) so you'll be able to get less cash with a HELOC that with a conventional refinance.

Good luck.

Rick
http://www.fairwaymortgagelending.com

Answer 6

Rent-To-Own Homes - http://RentToOwnHome.uzaev.com/?Txgt