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Need advice on a 2nd primary and what to do with force appreciation
So I have a primary residence now that I bought back in 2020. It has 3.125 percent and I’m sitting at about 100k in equity on that property.
Now fast forward 4 years, I found a potential good deal in a way better neighborhood that the wife and I want to move to. It's next door to her mother's house. The seller wants to do a private sale(yes I have an inspector and contractor on hand). He wants to sell for 300k but willing to negotiate. His has has 2 bed, 1.5 bath but has an unfinished basement which I'll be adding 1 more room and 1 more bath. Comps in the area are saying I'll probably get around 450k ARV.
Now with that said, after i cash out refi, how do I get into more real estate? I’d probably need money for a down payment and more money for rehab as well. I’m not too familiar with cash out refi and how much I’d get back and all the ins and outs of that just yet.
thank you in advance
Quote from @Tony Pham:
Congratulations on making it this far!
If you cash out your current equity, you will be borrowing money for the down payment. Your monthly expenses will include the new mortgage plus the loan against your equity. This is 100% leveraging, which is high-risk, and it probably doesn't make sense because the loans will be more than the income.
This property sounds like a good opportunity, but I recommend you find a way to save up for the down payment. Don't cash out the equity unless mortgage rates are significantly lower and the numbers make sense.
Quote from @Nathan Gesner:
Quote from @Tony Pham:
.
Congratulations on making it this far!
If you cash out your current equity, you will be borrowing money for the down payment. Your monthly expenses will include the new mortgage plus the loan against your equity. This is 100% leveraging, which is high-risk, and it probably doesn't make sense because the loans will be more than the income.
This property sounds like a good opportunity, but I recommend you find a way to save up for the down payment. Don't cash out the equity unless mortgage rates are significantly lower and the numbers make sense.
I’m sorry to mention, I don’t want to pull money out of the first house. I actually just want to rent it out and keep the equity in it.
im pulling out of my 401k for a down payment and my wife is going to pull 50k out of her trust fund for rehab cost on the 2nd house.
i was mainly talking about after i rehab the second house(will be my new primary). And cash out refi on that with the new ARV
Great idea by not refinancing that current mortgage on your primary. You will never want to touch that. Your going to have to wait to refinance after the work is completed to let the project season. Which won't be a terrible idea since rates should be declining at the same time. Then once seasoned, come back cash out refi into a lower rate and repeat if you choose to do so.
How long do I have to let it season? And yea I don’t want to touch the current property. I do want to rehab the new property and refi that into a new property. I just don’t really know what to do after that
Quote from @Tony Pham:
How long do I have to let it season? And yea I don’t want to touch the current property. I do want to rehab the new property and refi that into a new property. I just don’t really know what to do after that
12 months after the work is completed
And would you cash out refi or heloc? My realtor says to heloc for a down payment on another property
Quote from @Tony Pham:
And would you cash out refi or heloc? My realtor says to heloc for a down payment on another property
As long as interest rates are lower than what you currently have on the property I would do the cash out refinance and take the rate lower for everything. Heloc's are usually 1-2% higher than than mortgage rates.
Well my current rate I’m my primary is 3.125 and I don’t see rates going down to that for a long time if ever
Quote from @Tony Pham:
Well my current rate I’m my primary is 3.125 and I don’t see rates going down to that for a long time if ever
I will second that as well!