Property as collateral for real estate loan?

Question

In the midst of my real estate investing, I've come across the common obstacle of obtaining funding for my deals. After doing a little reading on such a issue, I gathered the idea that the properties that I'm looking to invest in can be used as collateral for the actual real estate loan. Is this true? I mean can I claim whichever one of my potential properties that I'm looking to buy as collateral for the same loan that I'm trying to get in order to buy that property?

Aaron Mazzrillo · Answer

Hey Rodney, Sounds like you don't have a lot of experience. That's a good thing though! We all started with the same questions. Yes, the properties you would be acquiring will be the collateral for the loans you get. Once you get a few properties and accumulate equity in them, you can use that equity for loans to acquire more property. I recently borrowed money from a private lender. I gave him a well secured 2nd (there is already a loan on the property and that would be referred to as the 1st) on a duplex I own. I used that money to acquire another property.

John Kubala · Answer

I came across this post too as I am a new investor also.

Is it possible to use your primary residence as an additional source of collateral to reduce or eliminate the 3.5% to 25% LTV of the investment property?

Thanks in advance!

Jerry W. · Answer

@Rodney Dixon you can use the property you are buying for collateral, but you need more than that property, the bank wants to be safe so you usually must pay for a part of the purchase price in addition to the property as collateral. usually between 3.5% to 25% depending on many factors.