How to capitalize on my home’s equity?

Question

My wife and I own our home in Nashville, TN.  We currently have $110,000 of equity and I’ve been thinking about scenarios in which to capitalize on this position.  Real estate in Nashville has never been hotter and, while no one can predict the market, I have concerns about a potential economic pull back and losing value in our home.  We want to begin to invest in additional properties, but I’m unsure of how best to proceed.  A few options I’ve considered are:

1.  Sell the house for cash, rent somewhere until / if the market pulls back, then start adding property(ies) while everything is low.

2.  Continue to sit on the house, build even more equity, and open a HELOC to purchase a duplex rental.

3.  Rent out our current house, open a HELPC to purchase a duplex rental, live in one of the units and get the other unit rental ready.

I’m sure there are strategies I’m not even considering, so curious to hear what others think.

Thank you!

Luka Milicevic · Answer

@Jarron Vosburg

Forget option 1. That is trying to time the market. You might be renting for a month and then have market crash or you might be renting 10 years. There's NO telling.

Go with option 4: Get a 1st position HELOC in your home (HELOC all in one). Google it and see what it's about but i think that is a good way to tap into equity.

Charlie Shew · Answer

Jarron,

I located in Lebanon, TN. I am sitting right about where you are at and want to do the very same thing. I need to proceed cautiously because my wife is not that excited about owning rental property. My plan is to buy a new home and rent my old one.

Your right about our market, it keeps getting hotter. I do a market report each week for Nashville Metropolitan, Wilson and Sumner County. While in the fall/winter months a lot of realtors were talking about a "shifting market" and as a realtor, we need to be prepared for a downturn. The funny thing is that was completely opposite to what each of my reports was indicating. I am not a doom and gloom person and I plan to proceed with my plan to purchase our next home and rent our current home.

Are you planning on doing the BRRRR strategy with a duplex? Are you on a drip campaign, this is where you will get an automatic notification if a home that meets your criteria is listed on the MLS.

Here is the list of all multi-family homes in and around Middle Tennessee. If anyone does want to get on my auto notification just message me and let me know what you are looking for.

Charlie Shew

Multi-Family Homes for Sale in Middle TN

Anthony Rushing · Answer

Luka, you may be onto something!!

The 1st lien HELOC option does work extremely well when it comes to having immediate access to the equity in your home.   It can also be an extremely powerful tool to pay down the equity in your real estate portfolio as well.

The strategy involves thinking about the HELOC in a much different way than we usually do here in the US (it's really popular in Australia, Europe and S. Africa.)  Basically your HELOC is set up to act as your cash-flow vehicle, meaning it's the main place where you manage household income and expenses.

Although it is extremely powerful,That begin said, it can also be detrimental for the wrong family, or if the strategy for it's success isn't completely understood or adhered to.  You have much more control over the use of your equity because it is much more liquid which is great for the smart investor, however it also has the ability to allow for families to leverage their

I've had a good amount of training and experience regarding this product and its strategy.  I've helped a number of  families with 1st lien HELOC product and advised families as to whether it might work for them or not.   The numbers don't lie, so when it comes to it.  That being said, there were definitely times, both from a numbers standpoint, as well as an ethical one, that I advised clients to go with a more structured route.  I don't currently sell the product, however I do know the strategy and the pros and cons that come with it extremely well.

Joel Mendoza · Answer

@Jarron Vosburg

#1 sounds like you are trying to time the market which could frustrate you. And as for #3 you can only get a heloc on a primary residence so of your options #2 sounds most logical.

How to capitalize on my home’s equity?

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