Do I have this right?

7 Replies

Note: This is my very first investment. I purchased a B2R in Cape Coral Florida. My financed amount being 231k but these are retailing for 310k... So if I see this correctly i could get a 2nd lien HELOC on this property and utilize that money for additional investments? Any advice is great! Thanks in advance.

If the lender offering the 2nd lien HELOC is ok with lending the money, then yes. The first mortgage holder doesn't care because they are in second position. That means if you sell, the primary lender gets paid first.

@Joseph Helms review your loan agreement and check with the lender if necessary. There are some loan packages that do not allow second mortgages, or require a specific approval and notification process to take place first. If you can go through with it, the primary lender typically requires that you hold some minimum equity in the property, again depending on the loan type. Assuming it's a single family, that number could be anywhere between 15-25%. So, you assuming you would theoretically be able to take out a HELOC against 85% of your current value of $310,000 ($263,500), you would then subtract the current mortgage payoff of about $231,000, leaving you with a maximum HELOC option of $32,500. After taking into account associated loan fees and interest, that final number is often a lot more work than most people are hoping.

Hope this helps!

I would never leverage a property that tight because when something goes wrong like you need a major repair for one property and you don't have the cash then your real estate empire falls like a set of dominoes. I think it is psychology better to know you have equity in a property just in case you have a serious emergency e.g. a property needs a new sewer that costs $20,000, or a property has fire. Insurance companies may pay for the re-construction, but you may not get paid for the loss of rental income and sometimes insurance companies tie up your property for a very long time getting bids for re-construction and sometime it takes a very long time for insurance companies to get experts to determine whether or not the fire was started by arson for insurance fraud and then your insurance company may not pay one penny to re-construct the property, you end up going to court and then what do you do?