Leverage existing rentals to buy more?

Question

Greetings all! I'm wondering if a HELOC is the only option to leverage my existing rentals to buy more?  I have 4 sfh's that are paid for, and want to find the best way to get cash to use for either a down on a small mf property or just by more sfh's!  I've financed primary residences before, but never a rental property so far.  Huge thanks BP friends!

Pouyan Broukhim · Answer

with the rates being where they are now (high 2s to mid 3s) if you are able to qualify for conventional financing then that would be your route.  Because the cheapest cost of borrowers.  In buying any property, you cost basis is the main factor and the lower your financing cost the lower the overall price of the project.

If you are getting an amazing opportunity and in the cost of the opportunity there is room for private financing and you need to close quickly then Hard Money/Private Money is a great solution  and there are companies like mine that offer cross collaterized loans or quick cash out loans to purchase other opportunities.

Thank you and good luck with your investing

Brian Payne · Answer

Thanks @Robert White

I always thought that I'd be in a better position to get equity if the properties are paid off. Does private money care about equity at all?  I guess my question is 'is a HELOC less expensive that hard money'?  What's the rate difference typically?  Thanks all...just trying to understand best practices. Cheers!

Robert White · Answer

Brian,

Not sure if the cashflow in that area justifies it, but you could also find some private money lenders to provide you a (70-80%?) mortgage on those properties at a higher than market interest rate, then use those mortgage proceeds to finance new investments.  I'm not certain if you'll be able to finance that much more than a HELOC, but it may allow you to finance the new purchases at a bank a bit easier.

Gino Barbaro · Answer

@Brian Payne

Hi Brian

There are investors on BP that lend to SFH.  I was speaking to an investor who lends to SFH.  I will shoot him an email and try to hook him up with you.

Speak shortly

Gino

Robert White · Answer

Well, if the properties are paid off you already have equity. Equity is basically the market value of the property, less any debt owed on it.

In terms of cost of borrowing, a HELOC is likely the cheapest right now.  Private money is next cheapest - probably in the 5-12% range, depending on who you know.  Hard money is the most expensive.  Those lenders look for points, plus higher interest, and only finance for short periods.

Leverage existing rentals to buy more?

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