I'm baaccckk..... Looking for small multi....

[Jennifer McPherson]

2.5 years ago we bought a second house and rented our first house. The first 8 months were a little scary but since then our tenants have been amazing!  They are now in the house for 2.5 years. We live in Colorado along the Front Range and the market is incredibly HOT. The house we rented out has $157,000 in equity based on current estimated sales value and our other house we live in currently (we just had appraised) has $130,000 in equity.  I am trying to figure out how to leverage the equity to buy a small multi family to add to our current inventory. Does anyone have any ideas on how to pull enough of the equity from either or both houses to use to purchase the multi family??  Thanks in advance!!!

[Andrew S.]

@Jennifer McPherson We used HELOCs on 2 of our properties to buy the third. The banks will limit you to 75% LTV on the non-owner occupied property, but on your primary you could go higher. Of course, I would recommend caution in going above the 75% figure in either case. The HELOC funds are available for the downpayment on your next acquisition but at no cost until you use them. Showing proof of funds is easy, as is drawing a check when it is time to close. The interest rate on the HELOC may be higher than refinancing, but if you do a cashout refinance, you're paying interest on money you don't need until you find the right property. Again, a word of caution, when you finance the downpayment with a HELOC, you are putting yourself in a highly leveraged position that may exceed the risk threshold for some people. The intent of this method is to use the funds to quickly secure the property and then pay off the HELOC to take an equity position and reduce your overall risk.