Looking for my first small multifamily rental, my lender has suggested me to use the equity of my house to pay in total the SMR and therefore just to have a mortgage on my house. Is it a good idea? And then, since the SMR is going to be paid off, get another home equity loan -since duplex, triplex and quads are considered residential property- to make down payments in more SMR?- Thank you,Newbies in long term buying and hold.
@Paulina Espinoza if you have enough equity to buy a rental outright, couldn't you just use part of it to pay the 20% down, or whatever your lender requires, then do that again for a few more properties? That way you would have some equity in the deals already but your still allowing the tenants to build the rest of it for you. You could also talk to another lender and run the scenario by them to see what they think.
@Paulina Espinoza - I'd say its not a bad idea. Especially if it's an open ended HELOC that you can use as your checking account. You only pay interest on money spent in that loan type
@Malcomb Stapel Thank you Malcom, I also think is better to buy several properties with the equity of my house, after all is what we learn here at Bigger Pockets.
Since this would be my first duplex, and I am kind of analysis paralysis after my first flip from last year, from which my daughters and I learned a lot and we just made a little bit of money, now that my lender, my bank from more than 25 years, suggest this idea (of paying off the investing prop. with the equity) I hope they don’t back up from lending me the money.
Keep you all posted about this. Thank you for your advice, make me feel more confident.
@Michael Ablan That’s a great idea about just paying interest in the money I use, because I can leverage and buy more properties. Hopefully my bank can help me happen. I haven’t tried to borrow money from other lenders yet.