How can I used my current rentals to invest in future ones?

Question

I have 2 rentals now but want to know what types of loans if any I can use to invest in more homes. Any one have any suggestions?

Nghi Le · Answer

I assume you have low-interest 1st lien mortgages on those properties that you don't want to pay off. If you can qualify for it, get a HELOC or HELOAN on those properties.

Or find a creative private/hard money lender that can tap into that equity in 2nd lien position or to cross-collateralize them with the purchase of the new property and use that equity towards your cash to close so you can buy that next deal without much cash out of pocket. This only works on flips and BRRRRs, otherwise you won't be able to pay off that much debt unless you have other sources of income coming in.

This is what I did on my last deal in TX. I had two properties in WA state that had 3% mortgages in 1st lien position, but was sitting at about 50% LTV on them. I purchased a 3-property portfolio in San Antonio (13 units) for $465k from a wholesaler and got a loan on them for $510k because the lender also cross-collateralized my WA properties (without paying off the 1st lien) and used that to cover all of my cash to close. I ended up getting about $20k back at closing (on a purchase) and used that to start my renovations on the vacant units.

Jacob Sherman · Answer

The DSCR loans are the best option to go with

Yolanda Martinez · Answer

Jay Hurst,

Yes I do but do all these options also go base on your DTI?

Jay Hurst · Answer

The answer depends on your situation. Do you have an idea of what your current properties are worth and what you owe? and what your current cost of interest is on the loans?

Simon Ashbaugh · Answer

A HELOC will be a good fit to leverage the equity you've built in your rentals. It lets you borrow against that equity to help finance a down payment or closing costs.

Jeff Chisum · Answer

DSCR cash out is probably going to give you the best rates and lowest fees compared to a Fannie Mae or Freddie Mac investment property loan. Find a HELOC for your investment property. I like this strategy as a go to. It's a way to leverage equity but not commingle debt. I did a podcast episode on this strategy about a year ago called "Creating Your Own Downpayment Bank"

Derek Brickley · Answer

Hey Yolanda! Depending on your situation, you could do a conventional cash-out refinance on the rental. Otherwise, you could potentially do a Debt-Service Coverage Ratio purchase or refinance to get the necessary funds which would be a cashflow based lending option for investments. It would depend the rentals you have and/or the property you might be looking for.

Katie Smith · Answer

Hi Yolanda. I'd look into doing a cash-out refi on your rentals. For cash-outs on investment properties - you can typically pull up to 80% of the value out, and it will take 25-30 days.

How can I used my current rentals to invest in future ones?

How can I used my current rentals to invest in future ones?

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