Owns a house with equity. Is borrowing money on equity good?

2 Replies

One of my friends want to get into real estate investing.  He currently owns a house that is at a good market price say 300K and he has purchased this 3 years ago.  The price of the house went up since last 3 years and since he paid 20% down, he said he has some equity on the house now.  Now he wants to move to a newer house as this house is built 20 years ago. The other day we were discussing and I suggested him to borrow some money on the equity he built since he was not willing to let this house go (wants to rent it) but doesn't have enough to pay down on the new house he wants to buy. I want to know if my suggestion did make sense at all. I am aspiring to be a realtor/investor at some point. That is what triggered me to share this idea. Pls share your thoughts.

I'd say yes borrow against it if he has a solid plan in mind, but make sure the house will cash flow before he moves forward. 

Thanks Samantha. can you pls. elaborate on what you meant by "make sure the house will cash flow"?

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