Tucker, GA · Member since 2015 · 3 posts · 0 votes
Hello Community,
This my first time posting and I need a bit of advice. I inherited a Townhome located in Chicago, Il and I decided to rent it out, which I currently have a tenant. It's mortgage free and I am trying to get info on if I should refi, cash-out, or get an equity loan (not sure on which I should be looking for) on this property for some debt consolidation. I would prefer not having my personal credit used for the loan determination if possible, or maybe a lender that would consider a low credit score, but not due to bad credit just overextended credit. Any guidance on how to find these lending sources (if they exist) would be appreciated.
My personal opinion would be to do a cashout refinance and at that time have it retitled into an LLC that you own 100%. That way the liability would be off of your name and you can get a commercial loan which would not be determined by your credit but the asset itself.
My personal opinion would be to do a cashout refinance and at that time have it retitled into an LLC that you own 100%. That way the liability would be off of your name and you can get a commercial loan which would not be determined by your credit but the asset itself.
Unless it is a high cash flow investment income property why no just sell it and move on. It is found money that could possible be better used else where.
@Dwayne Moore The main question is whether or not it cash flows with a new mortgage on it. If it does, and you would like to keep it, then the question is cash out or equity line?
If you are indeed weighing the two, I know people on here love equity lines like they love private money, hard money, and all these apparently easy/fail-safe options. However if you want my two cents you need to cash out and fix the interest rate.
An equity line is similar to a credit card in that the rate is traditionally not fixed, tied to Prime rate, and not capped. Not sure if you have seen any of the news coming out about the Fed but they intend to increase Prime three more times this year and up to four more times next year. That could spell some serious trouble for your equity line interest rate.
Especially if you have had issues with over extended credit, I think the equity line would be a horrible idea. Again, just my opinion.
Thank you, JJ, Thomas, and Jeff for the great insight and advice, this is a tremendous help. The Townhome is valued in the neighborhood of 75 to 83k, excellent shape and no mortgage. Very decent area and just 10 to 15 min from downtown with access to all major forms of public transportation. My desire would be to continue drawing cashflow from it. I believe I'll combine the advice of cashing out with a fixed rate and retitling to an LLC after I work the numbers for profitability with a mortgage. Thanks again.
What a great position to be in! We have been in the same situation, with a recently inherited property.
I would keep it with no mortgage, and use the income to first build an emergency fund for the property, and then an emergency fund for you. Then use the income to pay down your overextended debt.
Then you will be in the position you need to be for best interest rate loans. Or use the cash flow to keep saving up for the next down payment.