Scaling with existing equity - what to do

2 Replies

I am fairly new to investing in RE. Almost 5 years ago, I was approched by a widow about buying rental properties that she and her husband owned. I jumped at the opportunity. I bought 3 SFHs with zero down and gave her a 15-year note at 7%. I am coming up on the five year anniversary of the purchase. My question is what to do with the equity to acquire more properties. Any suggestions are much appreciated. I am using a buy-and-hold strategy for the most part, but will be glad to consider other strategies.

@David Holmes are the properties worth more than you paid for them? If so, you can cash out refinance! This would help make the original seller whole, and would also put money back in your pocket. You can generally get 70-80% LTV for 1-4 units, so if the properties have appreciated nicely you could put a nice chunk of cash back into your pocket.

I have gone through this with my first property which was a four unit in Lyons, IL. I was able to refinance about 7 months after purchasing the property which allowed me to recoup most of my original investment! This does wonders for your cash on cash returns, and also your IRR.

@John Warren Thank you for your reply. Probably not. These weren’t fixer uppers. They came occupied, and I’ve only had to fill a vacancy once (and that tenant is now multi-year tenant). It’s a small town, so values probably have not increased as rapidly as metro areas.

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