Looking to purchase a multi unit property with a 20% down payment. Lets say the property will sell for one million dollars. What is the better option for the down payment: sell securities and pay the capitol gains or tap a home equity loc at 3.25%? Holding period for the property will be at least ten years. How will either scenario effect cash on cash return and IRR? Thanks
I am actually more impressed that you have enough equity in your home to tap into $200,000 !!! If the multi family units are over 4 units then your dealing with commercial lending and will most likely be more then 20% down, more like 25%-30% minimum.
Building would be at least twelve units, PNC bank confirms they would do 20% down. Cost basis of securities is around 1/3rd of the sale.
Has PNC Bank done an appraisal? How far are you into the process? I have seen and closed on 20% down loans, but work at a higher threshold. Typically, at 20% down, rate will be slightly higher because of the added risk. Where are you looking to buy? I grew up in Chicago and still travel there often.
heloc is best. Your portfolio should be earning grater than the heloc rate so don't sell unless that is higher than the roi on real estate. Heloc is cheapest among everything as you have trapped capital you can use assuming it's your primary residence you should have the home sale exclusion on gain anyway.
Sorry I'm on my cell phone in the city. Replies aren't cooperating.
Thanks Steve, using trapped equity at a bit more than 3% makes the most sense.
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