Home equity loans versus bank/lender for getting started

4 Replies

New here and getting my feet wet in the learning stages of real estate investing. I'd like to get some recommendations from those more seasoned. We have around $200k in home equity and are about to begin the hunt for single family flips/rentals and/or multi unit rentals. Has anyone used equity loan to get started? Should we reserve the equity for EMD and rehab costs while applying for loans through bank/lenders to cover purchase price? Any advice on which kind of equity loan may be best in our case? Thanks!

@Caroline Landreth I would be cautious using all 200k on my first investment property as your risk of losing capital is higher as a new investor? 

How involved do you want to be in the process? Turnkey or full on rehabs? If you do rehabs then you'll have to manage the rehab and the contractor. 

An option is to put 20% down and fund the rehab yourself, then do the refi or pay all cash and fund the rehab yourself (or fund it via a private money lender) then refi.

Best of luck!

@Caroline Landreth

Here is my recommendation:

I used a HELOC from my primary residence.

I get a loan from another lender and use a portion of the heloc to pay for the downpayment and loan origination fees.

For example:

Let’s say I have 70k purchase price and 30k rehab.

I got a 90k loan for 10k down with 8k in loan origination/processing fees.

I used a portion of my heloc to fund the 18k and also used a portion of my heloc to fund the monthly interest payments for the 90k loan until the home began cash flowing.

I hope this example is useful. The power of "safe" leverage is underestimated!