Using Equity to build rental portfolio?

Question

Hi, I have a beachhouse that has approx 750k of equity and am looking at doing 1 or multiple things. At the very least, I will be using this property as a short/medium term rental. Also, I was wondering how/is it a good idea to use the equity in this property somehow to purchase other rental properties? Any tips are much appreciated! is there an episode i can listen to that targets this question? I should note this beach rental is in a popular location and renting the home shouldn't be an issue for families looking to enjoy a week or two super close to the beach.

Thank you!

Brad Jacobson · Answer

I'd guess the majority of serious RE investors got that way by leveraging property to buy more property.  You should absolutely be considering harvesting that equity.

Just note that with debt comes more risk and liability. Don't go for broke on your first few deals but I would absolutely put that money to work and go buy more.

Buy smart and you'll do amazing.

Good luck!

Jacob Sloop · Answer

Hey Tom!  Good problem to have ;)

Cash out refi or HELOC

Both have high rates right now so make sure the debt payment works for the return your looking to get from the investment its buying!

Olivia Grabka · Answer

@Tom Adams  I used the equity in my primary residence to build out my portfolio (18 flips & 17 apartments owned).  My house makes money, the equity you have in that house should allow you to build out big time!!!

Napoleon DeCiutiis · Answer

Tom,  As the others stated, I would also take out a HELOC.  Another route is using a DSCR loan to use the estimated property returns as income. @Tyler Solomon can explain what DSCR options are available for sure. Here is a link that helps explain it in layman's terms, and for sure hit up Tyler about it. #wealthofinformationhttps://theshorttermshop.com/h...

John Morgan · Answer

@Tom Adams

I did this with my STR a few years ago to buy 3 other rentals that cash flow well. I did a cash out refi and BRRRR’d a few with the cash. I’m a fan of using equity to scale up to multiply my cash flow. It feels like buying houses for free since you’re not paying a cent out of pocket to acquire more cash flowing properties.  I’ve bought 13 or 14 rentals from equity I had in other properties just sitting there doing nothing for me. I went from 2k/month net cash flow to 12k/month by doing this.

Wesley Myers · Answer

Great discussion. Assuming you’re using the income generated from the new property to pay off the HELOC or are you using income that the fully owned property is generating? What’s the typical percentage you can borrow against for a HELOC? Any issues obtaining if the property is in an LLC? We’re in a similar situation fully own one STR trying to scale up.

Brooklyn McCarty · Answer

I wouldn’t cash out. I would do a HELOC. I  don’t think I would use all of it at once. I would be cautious over leveraging yourself.

Melissa Nash · Answer

I took equity out of a property and bought 2 more. Bringing my portfolio to over $2mil with that one step. Always make your money WORK FOR YOU, no lazy couch potato money leaving around sitting doing nothing. +++ plus its asset protection not to leave equity in your houses.

John Underwood · Answer

I would do a HELOQ and leave that original low interest mortgage alone.

Absolutely use this equity to buy other investment properties.

Make sure to buy smart as some prices are coming down now due to economy and higher mortgage rates.

Nathan Florence · Answer

i am in same boat tom, got a lot of equity in a successful short term rental, but i am paying rent in another place, trying to figure weather to keep paying rent, or get a something i can live in with whole new loan and be building equity then go and leverage the short term rental for another spot, but dont want to get in over my head, market is spooky right now, let us know how you go!

Using Equity to build rental portfolio?

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