Leverage primary residence to buy investment property?

[Benjamin Qiu]

Greetings all,

Love your opinions on how to go about getting a second (investment) property after purchasing my current 2 family home in 2016. House is worth about $650K, owe $200K in mortgage (purchased at $505K, currently renting out 1 unit and live in the other here in Queens NY.)

Current situation:

Next multi family property ~$650K

$30K cash at hand

What's everyone's opinion on the best way to go about this? Heloc or equity loan?

Ideally is to purchase the investment all cash and refinance to a 30 years traditional. Appreciate any advice

[Marc Winter]

@Benjamin Qiu, first, congrats on finding a good Queens multi family for that price.  What part of Queens?

Now to your question: if your current property is worth $650k, a decent HELOC would appraise your total debt at about $490K (75% LTV). That would put $290k in your pocket. Not sure how or why you want to / plan on buying the next property for $650 cash.

Suggestions: Keep your $30K on hand for a rainy day. Do the HELOC, put down $165 on your purchase of the new property, and take a first mortgage for the balance of about $485K. Run those numbers: If they make sense, do the deal. If they don't make sense, you must know how will you subsidize the negative cashflow?

In NYC, after 30 years as a broker there in Queens, I can say it's almost always an 'anticipated appreciation' play, not a cash-flow positive.  Unless of course you plunk down enough cash to make it work, but that's a hefty chunk of change.

Good luck!