Use equity (and how) vs payoff to increase cash flow
If I’m looking to buy and hold SFR for cash flow, how do you recommend proceeding? Purchased SFR foreclosure in 2009 with $194K VA loan having 15 year fixed at 4.5 % APR. Current balance is $75K with estimated home value of $250K. We’re only 5 years away from payoff, and an $1,165 projected cash flow (not counting rent increases). Current rent is $1,800 per month, with negative $200 cash flow (if you don’t count equity as income). The thought of one property cash flowing over $1,165 is appealing, but the risk of lawsuit on a paid property makes me want to get a HELOC or refi and cash out. My credit score is usually at or near 850. Even if I don’t cash out, I’d like to buy property #2. Tapping equity in property number one would make financing number #2 a lot easier. Am I better off waiting a year and using my saved cash for a down payment, or tapping equity? After all, tapping the equity would delay the cash flow results I’m looking at seeing in 5 years. If I tap equity, what’s the best way (refi, HELOC, other) if my goal is to buy a second property?