How do I use my current properties as collateral?

Question

I'd like to purchase other properties using my other homes as collateral... What is the process?

Jesse Byrer · Answer

@Trecia Benjamin Jesse, great name, is right... HELOCs are often time the cheapest method to tap into your equity.  Down side is it's a variable rate product which is tied to the Prime Index.  HELOCs are great now as Feds have lowered Fed Funding Rates, but can and will go up.  Depending on your current mortgage (if you have one) and the rate on that loan, doing a cash out might make sense as fixed interest rates are so low you could take cash out and lower rate killing 2 birds with one stone.  Are you looking to Flip or Hold?

Jesse Lynch · Answer

Talk to a credit union or mortgage lender about a Home Equity Line of Credit(HELOC) OR a Cash Out Refinance!  If you have more than 20% equity in the homes, you should be able to take out an interest-only line of credit against that additional equity, which basically sits in an account without accruing any interest until it's used.  Credit unions tend to have great rates and lower closing costs/fees, so I'd try that first.  In the Twin Cities a really great credit union is Trustone Financial, but I'm sure you know your area better!Hope that's helpful!

Jesse Byrer · Answer

@Trecia Benjamin Ok, Buy and Hold...   I don't know if you own the home you live in or not, but if you do rates on your primary home are much lower than those on investment properties.  There are a couple different strategies, but another component is whether you are doing a BRRR or turn key.  Turn Key is much more straight forward... it more a ROI play on your cash.  BRRR will be more involved to set up property, but if done right you can scale your rental portfolio using the same money.  Just make sure to stick to the fundamentals! i.e. don't over pay, over rehab, move quickly, and know your comps!

Trecia Benjamin · Answer

@Amber Gonion Thanks Amber!

Trecia Benjamin · Answer

@Jesse Byrer Thank you.  Looking to buy and hold.

Trecia Benjamin · Answer

@Jesse Lynch thank you!

Amber Gonion · Answer

@Trecia Benjamin portfolio loan with a equity credit line is the route many investors take.

How do I use my current properties as collateral?

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