How to start investing with paid off home.

5 Replies

Hi,

This is my first post at Biggerpockets. I am so excited about finding Biggerpockets. There are so much information and different ways to invest so I am still learning and trying to figure out what I want. 

I am in Denver area(Highlands Ranch) and I have paid off my mortgage a couple of years ago. As I read and listen to biggerpockets, I wish I had invested in Real Estate instead of paying off my mortgage. 

I am thinking about moving out of my house and rent it. And buy another property to live in where I can do a house hacking to offset some mortgage. I have three kids and I never thought about moving because of the school, but we are doing homeschooling since the pandemic so I am willing to move to any areas in Denver.

Or I can buy a rental property without moving, but in this case, I still want to turn my walkout basement into a rental. I have one bathroom and one bedroom in the basement, so I am thinking about adding a kitchen to rent it out. 

Either way, what would be the best way to make a down payment to buy my first investment property? I do have money in index funds that I could pull out to use as a down payment. But I want to know if it would be better to use the home equity from my paid-off home.  

Let me know what you think. 

I would take out a HELOC (home equity line of credit) and use it for your down payment for your investment. Different strokes for different folks

I would recommend moving and renting out existing home. That way you can get into a new place with a FHA loan and only put 3.5% down since you'll be residing in the new place. This will free up lots of capital to do more investing. I would also use the Heloc for your 3.5% down. You could move every year and keep buy new places.

@Esther Kim I'd also explore the option of doing a cash-out refinance on your current home as well. You may get better rates than a HELOC and if you are going to rent out the property, you can have your tenant pay the new mortgage for you. Using a 30-year fixed rate conventional mortgage at a time where we've seen some of the lowest rates ever is a good bet in this competitive environment, plus a great hedge against inflation!

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