Pulling equity out of vehicle to use on property down payment?
Hey BP! I currently own a duplex and a fourplex, both funded via VA loan. Currently, I have little cash and cash out refinancing my properties is not an option. I have a paid off car and recently found a bank that would let me cash out refinance the car at 100% ($55,000) or 125% ($69,000, with gap), at a 3.25% interest rate.
I want to acquire my 3rd multi-family property within the next few months, whether using conventional loan or FHA. My W2 income alone covers both mortgages plus the potential $800-$1000 a month from the car cash out refi. My cash flow is solid, that being said, the risk isn't high.
My question is, during these high inflation times, and how expensive it is to borrow money, would you recommend refinancing my car and pulling out potentially 100-125% of equity out of it, and using that money on another property? My main concern is sitting on $69,000 cash with a car loan that's "under water", and not being able to find a property. At the same time, getting $69,000 at 3.25% in late 2022 seems like a great deal, any thoughts? Thanks in advance!
Hey @Sam Hudacek - Sounds like a no-brainer to me. If you can find someone to give you a 3.25% interest rate on your car when mortgage interest rates are in the 7s do that all day! Take out as much as you can.
You should be able to make way more than 3.25% in real estate, so you just need to make sure you put your money to work. Super smart of you to find an alternative like that.
I need a bank like that here in Chicago.
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Contractor IL (#TGC116360)
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Quote from @Jonathan Klemm:
Hey @Sam Hudacek - Sounds like a no-brainer to me. If you can find someone to give you a 3.25% interest rate on your car when mortgage interest rates are in the 7s do that all day! Take out as much as you can.
You should be able to make way more than 3.25% in real estate, so you just need to make sure you put your money to work. Super smart of you to find an alternative like that.
I need a bank like that here in Chicago.
Thanks for your thoughts! I feel the same way, with how expensive it is to borrow money, I feel like I should take advantage of this offer considering it might be the best I will find.
Seems creative, but wouldn't a car loan be amortized over a short period of time (5 years or so)? Versus a home loan with a 30 year am. Also, would want to ask my CPA about whether the car payments count as expenses again the rental income as well. Just a couple of my thoughts.
No $55,000 car will be worth it for very long. It will rapidly depreciate and you may end up underwater on your car very quickly. In my mind, if you have "little cash," you're going down a slippery slope without reserves on hand. I would be aggressively saving to put away funds for the next purchase instead of taking out debt on a depreciating asset. I am, admittedly, against debt for vehicles if you can't afford to pay them off. Just my two cents from a different perspective.
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Real Estate Agent
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What bank is willing to spit out 100 percent at 3%?
Quote from @Matt Hoadley:
What bank is willing to spit out 100 percent at 3%?
Granted this was last winter but Service First FCU in South Dakota, their rates were 2-3% lower than some banks after calling 25 banks.