BiggerPockets

Had a few thoughts about using equity to reinvest.

1) Is it a good idea to reinvest equity from one property to purchase another? Generally I see this as getting your money (equity) to work harder.

2) Is there a limit as to how many times I can pull out equity of a property to reinvest?

Thanks

jon is right on the money. i haven't heard of any lenders giving equities on NOO properties. getting a HELOC on your OO property though (or second home) is still possible.

If you mean taking a HELOC on my primary residence and using that to invest, no. I know lots of folks do that, but my goal is to have my primary paid off. I don't consider that to be an investment in any way. Its a money pit that gives me a place to live. Plus, I don't want to depend on the success of my RE investments to have a place to live.

I did take out a 401k loan some time back to jump start the process. Some people say that's a bad idea. But that's investment money anyway, so I consider this just an alternative investment. I also got very lucky and pulled this chunk of money out before the stock market crash. No great insight there, just luck.

One of our local hard money (squishy money, she call's it) lenders will allow you to cross collateralize one property to buy another. Her normal guideline is 70% of purchase and 70% of rehab, so you have to come up with 30% of both somewhere else. If you have enough equity in another property, you can use that as collateral for the 30%. The LTVs and her lower than typical rates is why she says is "squishy".

I have used my HELOC on my personal residence for down payment and rehab cost on several investment properties and then refinanced them after a year (seasoning requirement). Yes there is risk there but if you buy at a big enough discount that risk is minimized. When you do refinance be prepared to pay more in points and/or rates since the banks will penalize you for a cash out refinance. For me this is still the cheaper way of doing it.
Also, I have looked high and low for anyone that will do a HELOC on investment property and so far no luck.

Yes, it's possible. I've used HELOC's on 2 of my NOO properties to purchase/rehab new properties. Like Rich indicated - if you have done a lot of business with a local bank and have a good relationship with them it can be done.

In 2008, I was able to get HELOC on a NOO property through Wachovia Bank. Not sure if they are still doing that (especially since now they are part of Wells Fargo). At that time, Sovereign Bank was also willing to do a HELOC on NOO, but at much lower LTV.

Maybe someone with more experience can clarify...but I believe that if you're getting a LOC on a NOO property, it's not a HELOC, just a LOC. HELOC would be for your OO property. Correct?

The only line of credit I am aware of in my area is a blanket LOC. It's commercial credit and funding is made by small local banks primarily to people with a history. There's a different strategy I use. See the last part of this blog. http://www.biggerpockets.com/forums/12-starting-out/topics/32866-stupid-socal-misconceptions

i would not suggest you to invest in equity real estate investment is the better option.

Reinvesting your equity is a great concept but seems tough to do these days. I have decent credit and a couple of homes with decent equity but have found refinancing to be pretty frustrating. If its too costly or troublesome to get access to your equity the question of wether its smart is a moot point.

I guess my point is make sure you have access to it before including it in your plans.