Using equity in property to purchase another property

4 Replies

One fact to consider is when the first payment would be due. If you get a HELOC, that money would be available for you to use but you wouldn't start making payments until you had used the cash. With a cash out, you will owe payments the next month after you borrowed the money. That may or may not be important to your specific deal. Things do come up and timeframes change.

Some questions:

Do you already have the next property in mind and the deal ready? That would make either option pretty equal. What are the interest rates on both options?

I personally prefer having a HELOC on stand by, not a cash out refi.

Originally posted by @Ben Israel :
I got a heloc just as @Benjamin Small mentioned. It has worked out great for me allowing me to continue to invest capital into other opportunities that have come about.

Ben, Would you recommend this in a situation where the equity that you use does not cover the total cost of the property you are purchasing? I have $68K worth of equity in my duplex that i bought in December 2019. I found a 3 unit building for sale by owner for $99k. How could I work this deal?

 

That would be a very risky move, you would have a very high debt to equity ratio. So I would be very careful if you decided to to that. If you decided too, refi the duplex. Get around 20k or whatever you need out and use that as a down payment for a mortgage to purchase the 3unit