Guidance on primary residence home equity
Member since 2022 · 12 posts · 3 votes
Guidance on primary residence home equity
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Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
3yInstead of refinancing you could open a HELOC to tap into the equity to use to invest into other properties. I am not sure of your goals whether it be more capital or cash flow but the options would be plentiful with $800k at your disposal.
26 Replies
- Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes3y
Instead of refinancing you could open a HELOC to tap into the equity to use to invest into other properties. I am not sure of your goals whether it be more capital or cash flow but the options would be plentiful with $800k at your disposal.
- 3yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Tracie Soder sometimes this works a little like UBER - we kind of need to know a destination. As mentioned above, knowing what you are trying to do would be helpful in what we recommend. Are you trying to be involved in syndications? Rental Properties? Notes? Triple net leases?
In nearly every situation I don't like if you were to rent. In some cases renting is ok...like if you are uncertain where you will be next year or something like that. But renting helps me. I'm a landlord. Owning helps you. I want you to do what's best for you. Usually that's owning. Selling still might make some sense....but I would still advocate for you to target another primary home as a part of your plan. But if you can give us some ideas on what you you were thinking that would help. Hope all of that makes sense.
- Lender · Charlotte, NC · Member since 2020 · 224 posts · 221 votes3y
Hey Tracie,
I think a lot of people are in your exact same situation, with equity at your disposal, but no plan for it. Its a great place to be! I would say hang tight and do nothing right now until you know exactly what you will do it with the money.
I would NOT sell, unless you were moving cities/states or had a big reason to sell.
Doing a cash out refinance is most likely not a great move unless you had a plan to make double the return. Even that can be a little risky.
Just sit tight right now until you have a real plan with the money. "Where there is no vision, the people perish." Proverbs 29:18
- 3yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
A HELOC will be the way to go. The best part is that if you don't draw, you don't pay any interest/payments. They are a great tool to have on standby so when an opportunity presents itself you are ready.
I have seen many investors draw from their HELOCs, for the downpayment, rehab a rental property, and cash out refinance that rental property after 3 months to pay off the HELOC. A lot of variables here, but happy to chat.
LuxePrivate Investments LLC 572 Reviews - Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes3y
I would keep things simple- if you like your house, stay in it and tap on the equity to use for investing. Unless you want to move, then you could, but I wouldn't do it to force the use of the equity.
For the cash-out refi, when you say it's not advisable based on what you currently owe and years remaining... how so? When I look at cash-out refi options, I compare the cost of them to the returns of what I plan to invest in with the money. If the returns are higher than the interest rate, it can pencil out well.
With that said though, I would consider the HELOC so you can only pay interest on what you use rather than a set amount as you would with the refinance.
You may already have this info, but I'd first be clear on what you're planning to invest in. That's going to dictate the best way to use the equity for it. Without that, you'd be shooting a dart blind.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Tracie Soder:
I have a HUGE amount of equity (over 1 million) in my primary residence. I am in a great position; however, I am not sure what to do and have thought of a few options:
Option 1: Keep home and do nothing; however, I would not be able to realize the equity, but I have home security as I live in a great location.
Option 2: Cash out refinance-Interest rates would be higher than my current 4.25% and refinance calculators show it is not a good option based on what I currently owe and years remaining on loan.
Option 3: Sell house and realize the equity to reinvest. I would rent until I find something to purchase.
Option 4: Keep house, rent it out, but I would need to refinance to extend the term and lower my monthly payments, again, interest rate would increase as would interest I would have to pay longterm.
I am hoping I could receive guidance that will help me make a decision.Thank you so much for your time.
Tracie
sell your home and then move to Livermore for 800-900k cash. You will get everything much better than what san Jose can offer.
I am doing the same from 2 houses, so mine is bit more complicated. - Real Estate Agent · Livermore, CA · Member since 2016 · 173 posts · 74 votes3y
Quote from @Carlos Ptriawan:
Quote from @Tracie Soder:
I have a HUGE amount of equity (over 1 million) in my primary residence. I am in a great position; however, I am not sure what to do and have thought of a few options:
Option 1: Keep home and do nothing; however, I would not be able to realize the equity, but I have home security as I live in a great location.
Option 2: Cash out refinance-Interest rates would be higher than my current 4.25% and refinance calculators show it is not a good option based on what I currently owe and years remaining on loan.
Option 3: Sell house and realize the equity to reinvest. I would rent until I find something to purchase.
Option 4: Keep house, rent it out, but I would need to refinance to extend the term and lower my monthly payments, again, interest rate would increase as would interest I would have to pay longterm.
I am hoping I could receive guidance that will help me make a decision.Thank you so much for your time.
Tracie
sell your home and then move to Livermore for 800-900k cash. You will get everything much better than what san Jose can offer.
I am doing the same from 2 houses, so mine is bit more complicated.I like your thinking. I'm in Livermore now, moved from Mountain View. Not sure how much over $1 million equity you have, but sounds like you might be able to get into a new primary in Livermore with a healthy downpayment for an investment property. If you goal is cash flow look a bit further east for the rental property if you want to keep it near by.
- Rental Property Investor · San Jose · Member since 2020 · 44 posts · 22 votes3y
I would get the equity by doing HELOC and buy a multifamily or commercial property out of state where I can get a good cashflow!
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
HELOC for the win. I bought my first two properties with cash from a HELOC. Then it all snowballed from my original 2 paid off properties to 17 from using the equity in my original two paid off properties to scale up "for free" with that equity with no out of pocket money. Recycle that equity to get great cash flow. But take out a HELOC then pay it off quickly. Repeat if necessary.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
What would your monthly payments look like if you cashed out? Can you afford that? If you put tenants in there can you even break even? With this much gain realized I would sell and grow a portfolio.
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
we have a cart / horse situation here, as elegantly pointed out by @Andrew Postell
what do you want to do? what are your goals and interests in both RE and investing generally?
without that I don't see how any of us randos here on the ol' Internet could tell you to move out of your house!
But maybe you'd get better advice if we knew more about your goals, interests and overall financial situation.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Maria D'Aura:
Quote from @Carlos Ptriawan:
Quote from @Tracie Soder:
I have a HUGE amount of equity (over 1 million) in my primary residence. I am in a great position; however, I am not sure what to do and have thought of a few options:
Option 1: Keep home and do nothing; however, I would not be able to realize the equity, but I have home security as I live in a great location.
Option 2: Cash out refinance-Interest rates would be higher than my current 4.25% and refinance calculators show it is not a good option based on what I currently owe and years remaining on loan.
Option 3: Sell house and realize the equity to reinvest. I would rent until I find something to purchase.
Option 4: Keep house, rent it out, but I would need to refinance to extend the term and lower my monthly payments, again, interest rate would increase as would interest I would have to pay longterm.
I am hoping I could receive guidance that will help me make a decision.Thank you so much for your time.
Tracie
sell your home and then move to Livermore for 800-900k cash. You will get everything much better than what san Jose can offer.
I am doing the same from 2 houses, so mine is bit more complicated.I like your thinking. I'm in Livermore now, moved from Mountain View. Not sure how much over $1 million equity you have, but sounds like you might be able to get into a new primary in Livermore with a healthy downpayment for an investment property. If you goal is cash flow look a bit further east for the rental property if you want to keep it near by.
oh, you're from exp :-) I met other of your team member last week, they're nice :)
there's one very particular house that's very beautiful there in Livermore, an ex-contractor home with tons of modification, that home is so beautiful inside you can proudly include that home in the interior design magazine. - Member since 2022 · 12 posts · 3 votes3y
Thank you everyone for your input. Understandably, more information is needed to be shared in effort to provide more informed input.
I do have a plan-
1. My goal is to diversify (crypto, stocks, and real estate). I need to have cash readily available to reinvest in the market when the time is right.
2. I do need to stay within a 20 minute or so drive to Milpitas as I would really like to retire in the next 3 years so I can receive my minimum pension as I continue to develop a passive income level where I can work remotely if I so choose or just be more active in building real estate cash flow.
Someone asked, what am I afraid of? My answer is the real estate market continuing to decrease (i.e. losing equity) as I am down over the past several month. Of course, regretting not selling at the high, I just wasn't ready. My thought on renting was to wait for the market to settle before I buy, which is why I was thinking renting might be an ideal situation for the time being.
With everyone's input, granted not having all the information you needed, along with my research, I am leaning toward selling to realize the equity or staying and taking out HELOC.
I hope with more information, I could receive further guidance.
I really do appreciate all your help.
Thank you!
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
thanks for the additional info.
diversification is a good goal. just know that there is pressure on cash flow right now, so if you're hoping to replace W2 income with real estate income, it's as tough as it's ever been. that isn't to say that it can't be done, just that it requires patience, and buying the right deals rather than feeling like you "have to buy something now" because everyone on BP is.
you also shouldn't watch your equity fluctuate every day... not healthy, and not going to lead to good decisions. equity and stocks are going to fluctuate.
- Member since 2022 · 12 posts · 3 votes3y
Thanks Nicholas-
I am a speech-language pathologist, so one thing I have mastered is patience, lol. I am in a good position in the sense that I am not feeling pressured to buy anything right now (hence being okay with renting until the time is right).
Honestly, I forgot the plural 's at the end of month from my previous reply. In my area, equity has reduced significantly over the past 8+ months (fastest to rise and fastest to fall area). Of course, nobody knows if my area has stabilize or if it will continue to decline, but I do want to preserve what equity I have and be ready to purchase in the near future.
I am trying to make a healthy decision so weighing out all my options has been weighing heavily on my mind, so thank you for your insight.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Tracie Soder:
Thank you everyone for your input. Understandably, more information is needed to be shared in effort to provide more informed input.
I do have a plan-
1. My goal is to diversify (crypto, stocks, and real estate). I need to have cash readily available to reinvest in the market when the time is right.
2. I do need to stay within a 20 minute or so drive to Milpitas as I would really like to retire in the next 3 years so I can receive my minimum pension as I continue to develop a passive income level where I can work remotely if I so choose or just be more active in building real estate cash flow.
Someone asked, what am I afraid of? My answer is the real estate market continuing to decrease (i.e. losing equity) as I am down over the past several month. Of course, regretting not selling at the high, I just wasn't ready. My thought on renting was to wait for the market to settle before I buy, which is why I was thinking renting might be an ideal situation for the time being.
With everyone's input, granted not having all the information you needed, along with my research, I am leaning toward selling to realize the equity or staying and taking out HELOC.
just sell san jose and move to hayward/union city/castro valley with cash, it is still 20 mins.
Do not do HELOC.
Do not invest in crypto.
Do invest in safe investment assets only,like CD, index or REIT.
You're in a good position, put cash into gov. CD with 4-% rate, it's not too big a difference return if you invest in the Real estate.
If you want to invest in real estate investment, invest in reputable syndication only *after 2024/5* - 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
This is an important consideration when it comes to cashing out on a property. Although the gain realized may be significant, you need to consider your monthly payments and whether or not you can afford them. If you're looking to break even, putting tenants in the property might be a good option. Ultimately though, if the gain is great enough, selling and using that capital to grow your portfolio of properties could be a smart move. It's important to weigh up all of your options before making any decision.
It's best practice to seek financial advice from professionals in order to make the most informed decision possible. This way, you'll have a clear understanding of how each option could impact upon your finances and future prospects before committing to anything long-term.
Good luck!
- Member since 2019 · 7k+ posts · 4k+ votes3y
Here's my thesis why you should sell San Jose and move to surrounding more beautiful/more affordable homes.
San Jose homeownership is very unique because, in the whole bay area/silicon valley, we are the only homeowner that's very close to the center of silicon valley, so we're safe from any economic turbulence, although, the san Jose area itself I think is pretty ugly and not beautiful. The east bay (pleasanton/san ramon/danville/livermore/tracy) area is much more beautiful from a natural standpoint and yet still affordable. The job market in this city is also the best nationwide, it's just easy to get six range job.
So San Jose is funny, while the house and the surrounding are ugly, but the house price is going to the roof, in the next three years, san jose home appreciation would exceed san francisco (as SF becomes the epicenter of the ugliness). Thing is, these cities' standard home is only 60-90% of San Jose home, which give us a fair advantage, we can move from san jose to Tracy using cash, just like that. This is especially easier if you have large equity (almost everyone) and are not inside the tech industry and do not mind driving a bit more or using the train to commute. With the new culture of hybrid work, I almost don't see a need to have house in San Jose.
I predict the appreciation in the bay area for next 10 years will hit ceiling as the mortgage/income ratio in this area is the highest nationwide.
Btw, if you want to *lose* money, please invest in crypto. LOL :) - Member since 2022 · 12 posts · 3 votes3y
Can you provide me with data, or a place to research, to support the "high price is going to the roof" in the next 3 years? My area has taken a big hit over the past year, west of San Jose area, but I do see it steadily climbing again. My area seems to be experiencing a price correction which is why I am considering selling.
Any recommendations for a financial advisor in my area is also greatly appreciated. I'm looking for someone familiar with capital gain real estate tax laws as well as planning for retirement.
Thank you everyone and wishes for a successful 2023!
- Real Estate Agent · Livermore, CA · Member since 2016 · 173 posts · 74 votes3y
Quote from @Tracie Soder:
Thanks Nicholas-
I am a speech-language pathologist, so one thing I have mastered is patience, lol. I am in a good position in the sense that I am not feeling pressured to buy anything right now (hence being okay with renting until the time is right).
Honestly, I forgot the plural 's at the end of month from my previous reply. In my area, equity has reduced significantly over the past 8+ months (fastest to rise and fastest to fall area). Of course, nobody knows if my area has stabilize or if it will continue to decline, but I do want to preserve what equity I have and be ready to purchase in the near future.
I am trying to make a healthy decision so weighing out all my options has been weighing heavily on my mind, so thank you for your insight.
Tracie - Your comment about pension and speech-language pathologists caught my attention. I'm planning a trip to St. Louis in a few months to attend my cousins graduation from a masters program in speech-language pathology. I've helped him with investments in STL and I'm just curious if pensions in the field are common. He may already be aware, but if it's not common in the field I'd love to share some details with him about finding work in the field with pension potential. Message me if you don't mind sharing. thanks
- 3yJustin BrickmanBusiness MemberRealtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes
Heloc it!
Justin Brickman Realty4.9144 Reviews - Realtor · Gilroy, CA · Member since 2016 · 255 posts · 72 votes3y
Quote from @Tracie Soder:
Thank you everyone for your input. Understandably, more information is needed to be shared in effort to provide more informed input.
I do have a plan-
1. My goal is to diversify (crypto, stocks, and real estate). I need to have cash readily available to reinvest in the market when the time is right.
2. I do need to stay within a 20 minute or so drive to Milpitas as I would really like to retire in the next 3 years so I can receive my minimum pension as I continue to develop a passive income level where I can work remotely if I so choose or just be more active in building real estate cash flow.
Someone asked, what am I afraid of? My answer is the real estate market continuing to decrease (i.e. losing equity) as I am down over the past several month. Of course, regretting not selling at the high, I just wasn't ready. My thought on renting was to wait for the market to settle before I buy, which is why I was thinking renting might be an ideal situation for the time being.
With everyone's input, granted not having all the information you needed, along with my research, I am leaning toward selling to realize the equity or staying and taking out HELOC.
I hope with more information, I could receive further guidance.
I really do appreciate all your help.
Thank you!
I wonder if there is a lender that can use the equity in your home as collateral to purchase a new property as opposed to refinancing or selling. If I were you, I would do more research to see if it is possible so you won't have to touch your current mortgage.
- Member since 2022 · 12 posts · 3 votes3y
Good idea...I will definitely look into this as this is something I have not yet heard of as an option.
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