Leverage

8 Replies

I am looking for some opinions. I have 9 SFH properties, each paid for. I have found another rental house that I would like to purchase and have an unused equity line on one of the other rental properties that will cover the purchase of the new. The new purchase should have a positive monthly cash flow of $300.00 +/-. What's your thoughts?

What reasons do you have for not going ahead with it? Will the original property not cash flow?  How much will you lose by taking out the loan?  What interest rate?   Know your numbers and be confident in your decision as you move forward. 

I guess I am just looking for any words of caution or wisdom on leveraging one property to purchase another.

How long would it take you to put together enough money to buy your next investment home...without tapping into any of the equity in the first nine?  What would the monthly payoff/payments be on the refinance vs. the equity line?

I would estimate approximately one year to next rental house purchase with cash. 

Here are the numbers:

$150.00 equity line payment

$150.00 taxes and insurances

$600.00 monthly rent - I have a rental around the corner that is similar and rents for this

I am calculating with snowballing the other rental incomes with this.  I should have paid off in less than a year.

This particular home is in a nice area, priced right and is virtually turn key.  That is what makes it so enticing.

Depending on the cash flow, you could leverage all of the properties, so long as you have adequate cash reserves. Why not sit on the cash and use leverage to acquire additional properties?

I'm trying to make a play with a similar plan as you. You however, are much better positioned than I am. I do not have any of my properties paid off. It seems to me your 9 properties should generate enough cash to pay down your 10th very quickly. But Then again, I don't know what you're doing with your rental cash.

Let's do some math here. 9 similar rentals all paid for...buy a 10th 100% financed by incurring debt to do so on one of the other 9. Your total portfolio loan to value after purchase would be around 10% and could be paid off in 1 year if you choose.....yeah I think it's a pretty safe position to play from. :-)

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