Good News from Local Lender?

[Andrew Taylor]

So part of my "Learn to be an Investor" plan includes seeking out and interviewing local specialists that might be candidates for my future team (as recommended by Rich Dad). Today, I met with a local BP user who is both a real estate broker and a property management guy. We spent a couple of hours shooting the breeze, and I learned a great deal. More importantly, I took my first concrete, non-reading-a-book step toward my goals.

On the way home, I stopped at a local bank to meet the loan officer. I think this guy is going to be an excellent partner; they're a "cashflow lender" and he pointed out several times how they really like making commercial loans. Rates were low (3.5% if you go ARM) and I thought the terms were reasonable. The banker himself was very nice, and overall I was just really pleased with the visit.

While I was there, as we discussed my particular situation re: income, equity, savings, etc., I gave him the numbers on one of the properties I analyzed for practice the other day. It turns out that because of the equity I have in my home (it's paid off), I can actually do the deal just by signing papers. No money changes hands anywhere. I just sign on the dotted line and I'm into positive cashflow.

So I guess my question is (and why I didn't think to ask this while I was there, I have no idea), what does this transaction look like in terms of either limiting or enabling other, future deals? We actually live in what will be the guest quarters on our property; we built it first, then moved into it when I got laid off last year. When we are ready to build the main house, I'll need to take out a construction-to-permanent mortgage. If I've used the equity in the property as collateral on the theoretical deal, am I still going to be able to take out a loan for the construction of my house? Would I just need to pay down the original loan enough so there's enough equity again to make the LTV on the new house work?

I'm really just not sure how all that works, but I don't want to buy a property and then find out later that I can't build my house because all my money is tied up somewhere else.

As usual, thanks in advance for your input.