Leveraging my primary residence?

[Paul Kochendorfer]

Hey folks, I have a primary residence which I bought at $320,000. It's now worth about $380,000 and I owe $225,000. What are some ways I could use it to get into my first rental property? It seems to me that there is large gap between what I owe and what it's worth and I'm looking for ways to make use of that. Thanks a lot! I look forward to the responses!

Paul

[Josh K.]

Hi @Paul Kochendorfer,

Do you have a bank that will give you a HELOC on your equity? If your numbers are right and if you can leverage up to 85% of appraised value then you have access to 98k in equity. That's a start. Be aware of closing costs and such.

Some HELOCs are interest only during the draw period which lowers your payments while you put the money to work.  This is helpful while you set up your new properties to rent if cash flow is a concern.

In my area, I found a smaller bank that had minimal requirements for HELOCs under 100k and minimal  closing costs - some of which won't be charged unless I close the account within 3 years.  I was also able to use a recent appraisal from a previous refinance so I avoided that charge as well.

Could you use the BRRRR method to buy homes in your target market, generating funds to pay off the HELOC or repeat?

Good luck!