Buying an Investment Property - What do you think?

2 Replies

I have a ton of equity in my primary home and I plan to stay here for another 12 to 15 years. My current loan is around 100K at 2.75% interest and estimated value of 650K. My payoff would be in 2021. 

I have an opportunity to buy another underpriced investment property which should bring me 5% to 8% cash on cash return, cover expenses and then some, and the ability to write off my travel expenses on a quarterly basis. The property is located in a great area and will be professionally managed. 

My plan is to use my HELOC to secure the down payment, then refinance the HELOC (6.25%) and prime into one for a new balance of 350K at 4.25% ish. I would like to take additional cash out (150K) for liquid savings. This option would also reduce my monthly mortgage payment by about $600.00 a month.

I am in this for the long haul. 

What do you think? 

Hey @Chris Olson I am all for this. Your return on Home Equity is always zero, so why not go in and put it to good use, to accelerate your financial freedom journey?

Best of luck to you!

This seems too risky for the benefit you would get. In terms of percentages you would be doing about the same as the stock market and in the stock market you do not even have to hustle or risk loosing your hole mortgage. However focusing that this is a Real Estate community I would recommend to target a higher Cash-on-Cash return for such a risky move. One way to reduce risk may be using a home equity loan which allows for a fixed interest instead of a variable one like HELOCS (You may not even need to refinance with interest rates being as low as they are today). Another way to increase Cash on Cash return is by managing it yourself. There are great articles and tools in this website that show you how to be a landlord and that would give you 9% more. Now that is what I call a deal!