Rental Property Investor · Rosemount, MN · Member since 2018 · 8 posts · 8 votes
Good afternoon everyone!
I'm in the process of searching for my first deal on a duplex and trying to determine financing options. I have plenty of equity built up in my primary residence and was planning on using that as a down payment. When that 2nd loan payment is calculated into my monthly cash flow it goes from a modest $350 to negative.
Am i missing something? Are folks using this approach and waiting for a refinance to pay off the 2nd mortgage? Debt snowballing the 2nd mortgage asap to get it paid off? I also was considering selling some of my after tax investments but then I would need to pay capital gains on that money.
I searched around the forum and could only find posts targeted at heloc vs. home equity loan so if i missed it and someone has a link I would appreciate it!
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
I'm not sure your question is clear.
You're using a 2nd mortgage on your primary as a downpayment for an investment property. When you do so, the investment property doesn't cashflow. is this correct?
if so, this is certainly possible. your deal just might not be that good, and you're using a lot of leverage (financing the downpayment) so it requires you to buy at a discount. for example if you're buying a retail home and using 100% financing, then it's unlikely you'll find the numbers work. Find a distressed property that you can add value, and create some equity. This will allow you to grab that equity and cash flow, while financing 100% of the project.
It's all about your strategy and deal. Using debt to create cash flow is certainly possible, so maybe you can explain what you're trying to do a bit better.
Rental Property Investor · Rosemount, MN · Member since 2018 · 8 posts · 8 votes
8y
@Alexander Felice you’re exactly correct. I’m plannIng on using a 2nd mortgage on my primary residence to fund the down payment. When running my original numbers I hadn’t planned on that loan expense in the monthly cash flow. I was excited by the deal but now am discouraged because I thought I would be able to use that equity to my advantage. I still can just need to find a good enough deal to make it happen!
Thanks for your thoughts