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Updated almost 4 years ago on . Most recent reply
Using equity from primary home to invest in multiple properties
Hi everyone, I am new to this forum. I am ready to start my real estate investment journey and need your help and expertise. So my question is what should I do with the equity in my primary home to invest in multiple properties. I live in LA county California. I bought my primary home for 1.225 mil with a 15 year mortgage at 3% interest. I think my home might be worth 1.4-1.5 mil now. I have a balance of $260K left on the mortgage with 6 years left. What makes sense for me? A Heloc, home equity loan, cash out refi, mortgage loan with recast? Any other options that I haven't listed? I also wanted my investment properties to be a 15 year mortgage just in case that makes any difference on what I should do. I want to buy and hold properties for cash flow, long term and short term rentals. Thank you in advance for your help.
Most Popular Reply
@Julianne Paragas The way it works is you get a HELOC for say $300,000. Then you find a house that you can buy with your HELOC funds that might cost you $100,000 but after it's fixed up it should be worth more like $160,000 but it needs $20-$30,000 in repairs. Then you rehab the home and you get a tenant in there. Then you get a loan on the property for 75% of the new value of the home. This process might take six months. So you will pay interest on your HELOC during the six months that you're using this money. But that interest is relatively low compared to hard money costs. You should be able to pay off $120,000 or so towards the $130,000 that you borrowed to get buy and rehab the property when you refinance. So you should only owe about $10,000 more on the HELOC (of course there are closing costs involved which will increase that amount but I'm just trying to be simplistic in my response). Then with the cash flow from the property should be able to pay the new mortgage for the property and have enough to pay the interest on the HELOC and possibly even some left over to still cash flow. That's roughly how it works.