Newbie - What would you do with $350K in home equity?

Question

Hi BP Family,

I'm starting my journey towards financial freedom, and I was curious what you would do if you were able to pull $350K out with a refinance at 3.5%?

I want to eventually own an apartment complex, but since I don't have that knowledge or experience, my initial plan is to use a portion of the equity and buy a duplex that will yield 9.5% return - higher if I self-manage. I realize this may not be the best use of the refinance at the low interest but not bad either as I view this as a learning opportunity since it will be my first investment property. I can also eventually 1031 into something bigger, but I was curious what people who've had more experience than would do with this equity.

Thank you!

Joseph Firmin · Answer

Hi @Chris Kim! Instead of a refinance, why not do a HELOC with that equity and then you'll have that equity ready to tap into once you find a property or investment vehicle. If you want to own apartments, perhaps instead of buying a duplex, invest $50K into a multifamily syndication where you can passively observe how apartments are bought and run. Then maybe some of the other funds into another investment as well. $350K is a lot to get started and depending on the market you invest in, could create passive and active income quickly. Having refinanced mine when I started, I regret not doing a HELOC instead as I now had a higher mortgage payment and had it for the duration of time until I purchased something. If you buy a place with cash, you can do a rate and term refinance immediately after buying it (no seasoning required), then you'll have that cash back in your HELOC ready for your next deal immediately... Best of luck and I love your profile pic!

Joseph Firmin · Answer

Glad to help, the HELOC would be higher, but would offer you more flexibility with your funds and you'd only need to take out what you need and only pay interest on that portion. If you refinance, you'll be paying a higher mortgage on the full equity you take out. Either way works to get you on your path! Best of luck and let me know if I can help any further!

Chris Kim · Answer

@Joseph Firmin Thank you for the suggestion and comment on the pic! I'm definitely still new and I don't know much about HELOC. My understanding is that it carries a higher interest rate so I was thinking this cash out refinance will help start my real estate journey by buying the duplex and then take some time to learn more about multifamily syndication before jumping directly into it.

I really appreciate you taking the time and commenting! You're the first person to comment on my forum.