How to unlock Equity in rental property? Help on figuring out a potential strategy

Question

Hey all,

I have some questions about potential strategies with a rental property that I own in Sumter, Sc.

I bought this property in 2012 as a primary residence, however its been a rental property since about 2015.

My question is, the property has a decent amount of equity, and I'd like to try and leverage that equity to potentially get another property ideally in the same neighborhood since I've had amazing luck renting to military members. I'm open to other strategies but ideally trying to understand how to leverage the equity in the property.

Current Loan Balance: 100,952

Interest rate: 3.75

Mortgage payment + insurance/taxes: $1066

Rent: $1500/month

Estimated current value: 227k
Current cashflow: $369/ month, I also have a first american home warranty on it $68/month so after everything I net about $300/ month.

Let's hear some potential creative strategies!

Current Loan Balance: 100,952

Interest rate: 3.75

Mortgage payment + insurance/taxes: $1066

Rent: $1500/month

Estimated current value: 227k
Current cashflow: $369/ month, I also have a first american home warranty on it $68/month so after everything I net about $300/ month.

Let's hear some potential creative strategies!

Melanie P. · Answer

Is your rent quite a bit below market? You'll be able to use the strategies here to get a second property, understanding that if you do not increase rents you are probably going to wind up cash flow negative overall between the two properties.

Joseph Chiofalo · Answer

Hi Kurtis,

Is your current property a single family home or multi-unit?

If your credit is strong you may be able to access an equity line for up to 95% combined loan to value.

What price range would you be targeting on the new investment property ?

AJ Wong · Answer

HI Kurtis and congrats on the investment. You can do a cash out fixed equity line or second home loan towards the down payment of a new investment to keep your current terms intact. If you're purchasing a new primary you can tap an FHA loan for 1-4 units with 3.5% down, if you can secure a seller concession it could limit the amount of equity needed..if not a new multi family primary you'll need a larger downpayment (15-25%) depending on the property type and occupancy. You can also secure a first home loan against the new purchase and a second against the current rental as a simultaneous closing for a higher LTV.

Check in with @Joseph Chiofalo for help with structuring and evaluating several options. He's nationwide and excellent with investors. Good luck!