Using equity to build multifamily apartments

[Stephen Jones]

BP,

I am wondering if it is possible to use the current equity I have in all of my properties (roughly 2 million) to buy land and build new construction multi family units? Would I need money down? I’m just not sure how I am able to use that equity if I want to build units?

Also, I own a home improvement company so I have a lot of connections in my field to where I can cut corners on costs, labor, etc.

Any sort of direction and feedback would be appreciated! Thank you.

[Benjamin Aaker]

Quote from @LeeAnn Owens:

Can you elaborate on how using a property as collateral for a loan would work? If he has $2 million in equity, how much could he get a loan for without putting anything down?

Quote from @Benjamin Aaker:

Here are a couple options:

1. Take out a line of credit on the properties and use that to build new ones. You wouldn't have to bring any extra money in.

2. Get a new loan using the current properties as collateral and decreasing your down-payment on the new loan. This might avoid you having to bring any money into the deal.

One reason the bank wants a down payment is so that the borrower has 'skin in the game'. The OP has equity spread over properties, which implies some current mortgages. He could speak with the lender on his current properties about a new loan on current property A and prospective property B. The equity he currently has in property A would then be used as the 'down payment' on the new mortgage such that it met the banks LTV (loan to value) requirement.