$450,000 in equity, what do I do?

Bend, OR · Member since 2013 · 32 posts · 4 votes

Hello BP!

I have a good problem. I have a SFH rented out in the Seattle area, about three miles from Amazon's HQ. It has gone up a lot in the last few years. It now has about 450K in equity. I have it rented and cash flowing a small amount. I know it's bad practice to have so much equity in one place and I should refi and buy more. The problem is I have a 3.7% fixed rate on it, so a refi would be much higher at this point probably eliminate the small cash flow. Any ideas or advice would be appreciated!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Eric Healy:

@Bjorn Ahlblad great thanks, doesn’t this make it hard to find a cash flowing property that can pay both debt services?

yes !! you could play the arbitrage game and borrow at 4 or 5 on your heloc then use those funds to invest with a really good HML in Bend that is doing short term flips probably make 10 to 12 gross and net 5% to 7% on your arbitrage..

or you could just use the money for quick turn and burns.. if you have the band width to do those..

I would personally be reluctant to take on debt to just buy 100 to 200 a month of cash flow unless it was a property I had a pretty good idea was going to have a run up in value. Also did you live in it for 2 of the last 5 years if so might be a good time to simply exit and get tax free 450k.. then use that money to buy a small mulfi family with 30% down so your not leveraged to your eyeballs.

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Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Congratulations
What I would do ????? The power of leverage, I would find another rising market and continue growing my capital.
Timing is everything as they say.....
2 Reply
Javier D.
Investor · FL · Member since 2017 · 266 posts · 220 votes
7y
@Eric Healy
I would Refi to amount where cashflow is still 25irr year1 and get into a duplex or 4plex with cash out. Buy smart so you dont have to sell stupid.-Javier
Just made that up. Clever I know. Lol.
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Diana Muresan
Lender · Chicago, IL · Member since 2018 · 352 posts · 147 votes
7y
First of all is hard to find a lender that offers HELOCs on investment property and even when you find one it will be hard to qualify. What is the rent, mortgage, ins and tax? I am not sure your rent on a SFR will sustain a higher mortgage. You might be better off to sell and purchase a multiunit, perhaps you can even do it as an owner occupied, lower rate and minimum downpayment.
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Jeffrey H.
Baltimore, MD · Member since 2018 · 169 posts · 82 votes
7y
Sell, then 450k in lottery tickets. Youre welcome
0 Reply
Brandon Hicks
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
7y
@Eric Healy
1031 into another opportunity
0 Reply
Eric Bilderback
Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
7y
I would put it into multifamily. 10% COC is unrealistic here in Central Oregon in my opinion or at least my abilities, but I think you could by something with under performing rents and then over the coarse of a year or two raise them so you are getting 10% on your 450k, That would be using leverage. I'm going to take the liberty of PMing you to see if you want to meet up sometime.
Merry Christmas
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Matt J.
Investor · Tacoma, WA · Member since 2016 · 120 posts · 112 votes
7y
@Bill Goodland Great suggestion on using the HELOC for a cash purchase and then getting a loan after acquiring and paying off the HELOC. I've done this before and it works excellent. To all reading this thread just make sure you have the financial strength to cover a sizable HELOC payment.
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