Help me figure out how to tap into my equity!

3 Replies

The facts:

-Two properties (one in NC, one in FL)

-NC property has VA loan, FL property has FHA

-NC property has 0% equity, FL property has 25K in equity (purchase price 100k, appraised 125K)

-A VA IRRRL (interest rate reduction refinancing loan) allows the borrower to extract 100% of the appraised value! If only the VA loan was associated with the FL property and not the NC one!

Is there any other refinance program that allows the borrower to pull 100% of the equity out? Is a HELOC my only hope here? I want the 25K to do my first flip!

@Timothy Colman

If I was you I would look at refinancing your property with equity but NOT to another 0 down program. The fees on those things are usually not great at all. PMI alone can add another 100 a month to your payment.

I would refi to a conventional and drop the pmi as it sounds like you got 20% equity position. I’m assuming one of these properties is a rental? What’s it rent for? 

Even if you can pull out all your equity I would never recomend that. We like to have about 30 to 40% equity in our properties from forced appreciation/buying good deals within 6 months of the purchase date. That margin is a huge safety net for us as we can always fire sale them in a tough market and still come out ahead. Not to mention they actually cash flow. 

I would also make sure you have 6 to 10k in cash reserves. You own 2 houses and big dollar things can come up. 

I totally get needing more cash to get the deals comming in! I remember those days between deals 2 and 3.  For me the Capital came from us working our butts off and saving all our extra cash & figuring out some creative financing methods. 

Look for rally good deals. For us our deal 3 was buy for 49k and sell for 150k. Those are the numbers you are looking for. 

Good luck out there! Hope this random middle of the night musings are helpful. 

@Joshua D.

Thank you for your reply Josh.  

I agree the fees on the 0 down programs can be a bit much. I could be mistaken, but I believe I paid the PMI up front on the FHA. Further, the VA loan allowed me to forgo PMI.

I'll verify whether or not I pay PMI on the FHA (shameful I don't already know), and make a decision on whether or not to refi to conventional.

You made a good point regarding the margin as providing a safety net AND the fact that it will likely cash flow.  As it sits now, it's a great deal. If I refinance it and pull out all of the equity then it becomes a so-so deal.  I suppose I'll just leave it alone.

I have managed to keep a 10k cash reserve. I learned early on that it was an important part of life and I've stuck to that number for years now. 

The sole purpose of pulling out the equity was to invest further into real estate; whether it be another purchase for rental purposes, or the more likely, a cheap property to flip.  I now believe my best option is creative financing.  

The NC home is a rental that rents well, cash flows (not much), and is professionally managed.  It keeps trudging along and we've managed to get the principal from 114,400 to 92k, so no complaints there. The FL home is owner occupied by my wife and son at the moment. I'm stuck in Yuma, AZ on a Marine Corps Air Station at the moment :/

Thanks again for your reply and helpful insight!

@Timothy Colman you don't really have any equity to tap into. You can only borrow 80% of your $25K equity, if it is truly there. Be careful not to get too leveraged. If housing values drop, you will be upside down very easily. Your best bet is to pay down the NC property using the rent and your income to create some cushion of equity. The goal, I assume is to one day own them free and clear. Then your cash flow is doubled.

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