Using Primary Home Equity

[Adam Francis]

I own my home outright and was considering using the equity in my home to invest in my first property.
Good idea? It seems like that’s what most investors do with their properties but assumed there were some cons when it’s my personal home. Appreciate the help!

[Louis W.]

Using the equity in your primary home to invest in a rental property can be a good way to acquire additional real estate assets. However, it's important to consider the risks as well as the potential benefits before making a decision.

One of the main risks of using home equity to invest in a rental property is that you are using your primary residence as collateral for the loan. If you are unable to make the loan payments or the value of the rental property decreases, you could potentially lose your home.

Another risk to consider is that, as a landlord, you are responsible for maintaining the property and handling any issues that may arise, such as repairs or tenant disputes. This can be time-consuming and costly.

On the other hand, using home equity to invest in a rental property can also provide a number of potential benefits. For example, it can be a relatively low-cost way to finance the purchase of a rental property, and the rental income from the property could potentially help to offset the costs of the loan. Additionally, if the value of the rental property increases, you may be able to sell it for a profit in the future.

Overall, the decision to use home equity to invest in a rental property is a personal one that depends on your financial situation and your risk tolerance. It's important to carefully weigh the potential risks and benefits before making a decision.