Use my current home to fund my next deal?

[Dennis Standers]

Hi all, How can I use my current rental SFH as a down in my next deal? Can I put up my house for collateral to fund a duplex deal? How does this strategy work? Is it even possible? The equity is slim does that matter? Thanks Dennis

[Rob Beland]

Yes @Dennis Standers you could use one house as collateral for another but you need sufficient equity. Its called cross collalateralization. As an example. If your SFR was worth $200K and you had $100K in equity, you could use $50K of the equity for the down payment on the duplex. Assuming cost of the duplex was $200K, the $50K would give you the 25% equity needed for the duplex getting you the property with no money down. If the cost of the duplex was $400K you could still use the $50K from the SFR but you would still need to come up with another $50K. Equity is the key. Banks typically won't allow you to go below 25% equity in any one property.