best way to get money out of a home
Investor · Midland, TX · Member since 2014 · 9 posts · 1 vote
Hey BiggerPockets,
Thanks for all the great info.
New member here with a question:
I have been researching and reading about rei and I have a plan in my head. I wanted to to throw my situation out there and see if any responses lined up with my thinkng or learn something new. Here we go.
I have no debt, including my home. Home value is around 200,000k. I have an emergency fund built up that i do not want to touch because I am very conservative (my outlaw nickname is like calling a big guy tiny) and like a safety cushion. I want to get into real estate investing to get better returns on my money and build wealth for the future. I will say that I want to be fairly hands off and increase monthly cash flow with minimum work. (don't we all) My question is this-
If you had access to home equity funds how would you access them and then invest them in real estate?
Thanks
HI Casey,
I suppose it depends on:
- knowledge in real estate investing
- alternatives with other investments or areas where you can grow money in lieu of real estate
- your objectives (cash flow, equity, tax, how much equity you need to reach critical mass, etc)
It could be a great place to place your money in real estate if you know what you're doing or it could be disastrous. The same can be said about stocks, businesses, etc
@Casey Green if I were in your shoes, I would take 80% of the value out of the property with a 30 year fixed rate loan. And as long as you need more funds to invest, never pay back a dollar a day early. That's the best way to take advantage of today's low interest rates. I would visit a few small/regional banks or credit unions and find out which ones offer you the best options for whatever your strategy you will pursue in your business and deposit the proceeds from your cash out into a commercial account. You may want to explore the great advice of "how to set up a bank book" that you can get from www.memphisinvest.com for the price of your name and email address. It's a video tutorial that will really prepare you before you start talking to bankers about being an REI.
You may want to consider turnkey investing if you want a real passive approach to REI? Just do your homework and be certain that you are dealing with a solid turnkey company.
For me, the best returns are in actively purchasing, renovating and renting the properties I buy. If that's what you want to do, you can use your cash buying advantage and buy properties with cash and then refinance them for long term with your new business "partner," the commercial/portfolio lender! Just be sure to always keep about 20% of your cash, as a cash reserve for your business - and expect the unexpected!
DISCLAIMER: I have no affiliation with Memphis invest, I just find the information that Chris Clothier shares very valuable.
@Casey Green welcome to BP Casey
@Casey Green if I were in your shoes, I would take 80% of the value out of the property with a 30 year fixed rate loan. And as long as you need more funds to invest, never pay back a dollar a day early. That's the best way to take advantage of today's low interest rates. I would visit a few small/regional banks or credit unions and find out which ones offer you the best options for whatever your strategy you will pursue in your business and deposit the proceeds from your cash out into a commercial account. You may want to explore the great advice of "how to set up a bank book" that you can get from www.memphisinvest.com for the price of your name and email address. It's a video tutorial that will really prepare you before you start talking to bankers about being an REI.
You may want to consider turnkey investing if you want a real passive approach to REI? Just do your homework and be certain that you are dealing with a solid turnkey company.
For me, the best returns are in actively purchasing, renovating and renting the properties I buy. If that's what you want to do, you can use your cash buying advantage and buy properties with cash and then refinance them for long term with your new business "partner," the commercial/portfolio lender! Just be sure to always keep about 20% of your cash, as a cash reserve for your business - and expect the unexpected!
DISCLAIMER: I have no affiliation with Memphis invest, I just find the information that Chris Clothier shares very valuable.
Hi Robert,
The only problem is conventional only allows a maximum of 75% on the cash out of SFR's when the borrower has 1-4 financed properties, perhaps you are referring him to portfolio lenders and credit unions who can sometimes be 70-80% depending on bank or institution. The bank book is only needed for those type of make sense lenders who consider deals in front a of a credit committee where make sense lending and selling of your credentials will be of value.
In conventional lending the most a borrower will need is a good letter of motivation or explanation on why you're buying and what you hope to achieve. The extra items on a conventional file that relates to a bank book have just bogged down the processing time on a conventional loan file where we already have enough documentation. The difference is that since agency loans (FHA/Conv/VA/USDA) are sold to the market the bank is mostly first and foremost concerned with the ability to sell the paper on the secondary market at the maximum profit possible and the actual repayability is secondary in nature. Agency lenders are mostly only concerned with timely payments only for only as long as the representations and warranties require on the note.
To answer @Albert Bui 's question. Yes I am referring to what you need to do in terms of setting up business credit and doing your investing like a business. The 4 loan limit and other conventional loan limitations are the reasons why you would want to start out as I suggested as opposed to dealing with those limitations.
one contrast is conventional money is 30 year fixed while portfolio and business make sense loan programs at community and local banks are usually 5/1, 7/1, 10/1, or 20 year fixed with balloon periods at times.
Most people should max out the safe cheap money as efficiently as possible if it makese sense for them.
One benefit I see with my portfolio loan experience is that while the portfolio loan has potential balloon or rate adjustment periods the LTV was much higher allowing me to put less down than conventional financing so I personally preferred the portfolio option which was 80% ltv over 70% ltv conventional 1-4 financing.
Hey everyone. I appreciate the knowledge and the welcome! The portfolio option is new to me. I had been leaning towards a "safe" 30 year fixed at a low interest rate for stability. I look forward to exploring some different options. Thanks again.