Accessing my home's equity for a flip

9 Replies

Hi All, 

I'm new to this forum and very interested in doing some local foreclosure flips. 

I currently own a home which i just closed on a refi after living here 5 years, valued at 550k in which i have about 120k in equity. I also have about 60 liquid, and excellent credit.

The properties in my area may be priced around 400k. 

Could I use my homes equity for making a down payment on an investment property? Which type of loan product should i be looking at? 

or how could I convince family or friends to trust in my ability to make them a good return on a short term loan? 

Hey Nick

Welcome to Bigger Pockets.   

What are units going for in your area?   

You may be able to buy a small apartment complex with that kind of down with a solid cash flow.   This will not only make you a monthly income, but allow you to take advantage of tax benefits and appreciation.    

Here is  ink on private lending that should help you with approaching family and friends.   There is alot of info here

http://www.biggerpockets.com/renewsblog/?s=private...

Hey Gerald,

Thanks for the link...  

Homes in my area of Brooklyn can go from 375 for a single family to 750+ for 2 family.

or 1 million + for 3 family Brownstones in need of rehab

Hey Nick,

I got a 90% LTV interest only line of credit from my credit union with a 3.25% variable interest rate. So that would get you about 70k.

I haven't taken advantage of it yet, but they'll also do a "homeowner loan," which is a lien against your house but requires no equity. That one is capped at 50k and has a 7.5% variable interest rate and is amortized over 10 years (if memory serves).

That would get you a good chunk of change, but you'd probably still need additional financing to flip in Brooklyn.
As a previous poster suggested, you could do a rental.

If you can get something cheap , pay cash, and do some repairs, you could then get a mortgage and get a great deal of your initial capital back.

Hey Nick,

I got a 90% LTV interest only line of credit from my credit union with a 3.25% variable interest rate. So that would get you about 70k.

I haven't taken advantage of it yet, but they'll also do a "homeowner loan," which is a lien against your house but requires no equity. That one is capped at 50k and has a 7.5% variable interest rate and is amortized over 10 years (if memory serves).

That would get you a good chunk of change, but you'd probably still need additional financing to flip in Brooklyn.
As a previous poster suggested, you could do a rental.

If you can get something cheap , pay cash, and do some repairs, you could then get a mortgage and get a great deal of your initial capital back.

If you want to finance, you're looking at hard money or a construction loan, probably from the commercial loan dept.

so in my case would a HELOC be advisable for a flip?

That's probably going to be your cheapest source of money, so that's what I'd do.

We LOVE our heloc on our primary residence.  And we do loans with family.  We draw up paperwork, we show them that they will make more with us than with their current options with a win-win interest rate.  I don't think you need to convince them that you will succeed, you need to convince them that they will get their money back even if you fail.  After you have a few wins it gets easier.  And if you are going to continue with flips, maybe you want a longer term loan so that everyone gets more out of the arrangement.  If you have family at retirement age who need to distribute funds from their retirement accounts but don't really need the cash, they may prefer a steady repayment and interest revenue stream than the peaks and valleys of hard money lending or profit sharing.  Figure out what they are looking for in an investment and align to that in a way that you both benefit, but especially them.  The heloc is someplace you can park funds that you don't need between deals.

Thanks guys for the response,  very helpful!

im Def going for a heloc. between our incomes alone we'll cover all the payments with some left over for Jr. ,and rental incomes will all be banked If I hold on to the property longer.

Now I just need the right property!

I really like the idea of profit sharing. 

thanks again everyone 

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