All Forum Posts by: Jonathan Towell

The other way you could use the equity is by using it to secure a line of credit. This would allow you to keep your current financing in place. You'd have to find a bank that would allow you to secure the line using second liens.

You might call around local banks to find one who would let you have a line of credit using a 2nd lien on your property as collateral. A lot of banks won't do 2nd liens, but some will.

I might expect interest only, floating rate, 2-3% above prime.

Very cool. Congrats!

I would recommend pulling comps (ask a realtor friend) to see what the duplex is worth. Make sure you are buying 10-15% under value. If you do it that way you'll have flexibility with more exits. If you need to refinance you'll have flexibility to do so because you've got equity. If you need to sell quickly you can do so without taking a loss.

William Jenkins I've got some land on a property perfect for a tower. Would you be interested in helping me secure a tower/lease? Is that a service you would offer? If so please connect and send me a message. Thanks.

What is the property worth? If $215k + repairs still leaves you 10-20% under the appraisal value, then it might be a good deal. (still need to run the numbers and analyze the area)

@Account Closed

Those are my points exactly. Maybe you're looking at MLS listings, Loopnet, a stack of rentals sent to you by an investor exiting the business, whatever...

I was just explaining what the 2% rule was designed to do, thus attempting to answer the question "what is the 2% rule?"

The 2% rule is not that great a rule and should not be used to make investment decisions.

@Jacob Edmond

Do you have enough equity where you could do a cash out refinance? If so, how much cash could you pull out?

Another question... do you have enough cash on hand for a 3-10% down payment on a new house?

I'd say it depends on your goals. What would you do with the cash you pull out via refinance? Or, if no cash is coming out, is it worth the ~$3000 origination fees and closing costs to do the refinance only to avoid .85% in PMI? Or would it be better to just accelerate your principal payments over the next few years? Are you going to hang on to the house for more than 3 years? Or are you planning on selling soon?

Here is the 2% ratio:

Monthly rent / purchase price

The monthly rent does not determine the market value of the property. Properties under 5 units are appraised based on comparative market analysis (comps). Properties 5 units and more are appraised using an income approach.

The 2% rule is just a way for you to quickly scan 100 properties and in 5 minutes identify likely candidates for further investigation.

For example, if I'm looking at 100 properties on MLS and I see one that is priced at $100k that rents for $2,000/mo, that property meets the 2% rule. I then want to take that property and investigate location, comps with other properties, inspect the property, etc.

Do not base your investment decisions on the 2% rule.

It is possible to take a $100k property currently renting at $1k/mo (1%) and increase the rents. It is also possible that a 2% property has unsustainable rents, is in a poor appreciation area, or is a bad investment for any other number of reasons.