Using equity to purchase investment properties

4 Replies

My wife and I currently own and occupy our first investment property, which is a multi family in a pretty popular part of Portland Oregon.  We have owned it for a little over a year, and have roughly 200K in equity that I would love to use to purchase another property.  The equity gain is primarily from appreciation, and not from paying down our mortgage.  The problem we are running into is that we both went self employed in the last year, so we don't qualify for conventional fencing.  What other financing vehicles are available for our situation?

if you can't get a HELOC, you might be able to purchase property on a land contract and offer to use your investment property as additional collateral

@Nate Lindquist  Seems like a SISA (stated income, stated assets) loan product is what would suit you. It wouldn't give you conventional rates, but depending on your use of funds, it may work for you. 

@Nate Lindquist   Private money/hard money is always an option although higher rates/fees also a seller carry. I have worked with clients to purchase those cash only deals then fix up and refi conventional, with self employed it is harder in the first 2 years without proven income/results from investments. I too will not be able to finance in the coming years being self employed. I made the jump to being a landlord to help shorten that 2 year window.

Sounds like you are close with 1 year of rental income so far. Non traditional is key here

Originally posted by @Nate Lindquist:

My wife and I currently own and occupy our first investment property, which is a multi family in a pretty popular part of Portland Oregon.  We have owned it for a little over a year, and have roughly 200K in equity that I would love to use to purchase another property.  The equity gain is primarily from appreciation, and not from paying down our mortgage.  The problem we are running into is that we both went self employed in the last year, so we don't qualify for conventional fencing.  What other financing vehicles are available for our situation?

HI Nate,

I noticed you said you went self employed in the last year so you'll be coming up for your first year's tax return soon right?

There are 1 year tax programs available. So if you made some money and you strategically file your return early in Feb-Mar 2015 for 2014 year you might be able to qualify.

Requirements:

- you've worked in the industry you are currently self employed in for 2+ years documented by CPA letter or third party verification, license, or other document

- one year filed tax returns with acceptable income (income will be averaged over 12 months)

Most banks will want 2 years but 1 year or stated programs exist. The problem with stated programs is that you'll need an incredible amount of reserves and they dont go up very high in LTV on cash out's. So if your reserves are low and you dont have equity below 70% LTV with respect to market value then stated may not be an option unless you can find a source who will be willing to lend with your specific criteria.

The above 1 year tax program is for a conventional 30 year fixed that allows cash out to 75-80% depending on your specific set of circumstances on a non owner occupied property. Let me know if you have any additional questions.

Good Luck,

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