How to use equity from primary home for investing?

Question

Have around $200k in equity in my primary home. What are some of the ways this can be utilized to buy investment properties? Do lenders give loans after assessing the home? How does this work? Can this be done?

Account Closed · Answer

Have around $200k in equity in my primary home. What are some of the  ways this can be utilized to buy investment properties? Do lenders give  loans after assessing the home? How does this work? Can this be done?

• Create a commercial credit line, using your equity. When you need a loan, your are the banker.
• Refinance your home, invest the proceeds
• Create Split notes mortgage, use them as down payments on properties or sell subject to a discount for cash.
•  Use your collateral to secure a seller financed mortgage, make sure you build in a release after x % amount of the mortgage is paid off. (this releases the collateral to be used again.)
• Move, rent your house, sell it subject to a 1031 exchange.
• Get second mortgage, use the cash to buy cash flow properties.
• Pull out cash, loan some of it out at hard money interest rates to investors, (maybe use an equity kicker) use those mortgages as consideration for cash flow properties (think about this one!)

Charles

Willem Young · Answer

Well said Charles.  @Bob Roach  If I was in your position, what I would do is cash out of the equity in your home and use the cash to put down on cash flowing real estate that will pay you a spread / arbitrage on your money.  The interest on that primary mortgage is a tax write off and rates aren't going to go lower for a while unless we see a catastrophic market changing event.  If you have a normal income that will cover your DTI and average or above credit you can go do a standard lender.  Like Quicken loans or any normal lender.  If you have no income and are retired for example, you would want to go to your local bank you may have a relationship and they may work with you on a line of credit to draw down as you need it.   Worst case, you could sell your house to someone else and lease it back and cash out that way but that's extreme and then you would be paying someone else's mortgage down.Back to investing in real estate that will pay you a spread.   There are properties you can purchase with loans that will return you high cash flow.   There are turnkey operators that will handle the entire process for you and get you into cash flowing properties.  There properties that you can put down ~40K in cash and make ~1K net (including all operating expenses and mortgage payment) per month.  So in theory, you could move that equity around and come out with close to ~4K per month in new cash flow and you're paying down your loans and appreciating in equity over time.  You would have to offset that by the cost of your primary loan which to be conservative would be ~1k if you can get a conventional loan.  So after it's all said and done, you could own more property and net ~3K per month in cash flow.  Make sure you save some of that cash flow for maintenance.  We recommend 6-10%.  We offer our buyers a 12 month warranty against any repairs but it's still good to have some reserves after that.

AJ Minaker · Answer

we are currently using our home equity to open a business line of credit. We plan on buying fixer uppers with our Loc. After the property is fixed up we will do a refinance. Doing the refi will open back up our loc to start the process all over again.

Account Closed · Answer

Thank you for the kind words and the vote.

Joe Fairless · Answer

@charles

Charles Parrishwow, wish I could vote for your post twice. That's next level insight.

Michael Lee · Answer

Hello!  It should work out and be used.  Talk to a local bank broker to see what they would try to require.  He should know your answers if he/she has enough experience.  He knows what the bank will require and tell you. I hope your credit is OK and that will not create any problems.  Your credit score will matter.  Good luck!  If you are putting some cash in the deal that will help you.

AJ Minaker · Answer

We will use the equity from the properties we have as collateral to open a business loan loc. We use that loc to pay for the property and to fix it up. Once it is fixed we will get it appraised and do a refinance. You should listen to podcast 134. It talks about creative financing. Hope that helps. Any other questions, let me know.

Bob Roach · Answer

Are you planning to refinance the fixer upper? How does this open up the loc? I know these questions are very basic. Very new to this. Thanks in advance!

How to use equity from primary home for investing?

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