Using a Home Equity Loan to purchase more property

1 Reply

Hello Everyone,

I wanted to get varying opinions on utilizing a home equity loan to help cover the 25% down on a multi family home. I understand that it comes down to if you will be making money and ensuring you can create some cash flow, however I would like to hear about some success stories or lessons learned when it comes to repositioning your equity. If you have any other feed back feel free to share. 

Thanks 
Alex

Alex,

I think in the short-term that's OK, as long as you plan on refinancing out. Otherwise, you can get over-leveraged quite quickly.

I have a 3-unit project right now. I'm using a business line of credit to finance the purchase. The total cost of the project is ~65k including repairs . I had a realtor run a CMA for me which confirms a potential ARV of ~ 85k. I also have established relationships with local banks and know their terms and requirements well. One of them should give me the $85k ARV at 75% LTV, which would get me close to 100% back out when I refinance. Total turnaround for the project is about 8 months. The on to the next one!

So, I would say short term leverage as such (similar to your equity line) is fine as long as your exit strategy is in place. That means knowing your ARV and having the bank relationships to execute.

Hope that helps.