Equity from rental- Question

[Kristin Carter]

First post in BP!!!! We are so happy we found this resource!!!! BACK-STORY- We own a house and 5 acres right outside Nashville (our home- with a mortgage). I am an only child. We recently bought the home and 6 acres next to us for my aging parents. Their old house is in my name. We are using the old house as rental property. Our rental home is mortgage free. The income from the rental home is paying for the new property next door. What is the best way to use the equity from the rental to buy our next property? We have about $30k in savings. We would like to hold on to that if possible. Please advise us on what to do. We are VERY NEW to this. We eventually want to buy a multi-family property (or multiple). Should we do a HELOC on the rental property? Please adivse.

[Luka Milicevic]

@Kristin Carter

IF IT WAS ME.....

I would get a first position HELOC on your mortgagee free property.

Use that to buy your new rental as basically cash. Cash bc you have access to the funds instantly via your HELOC. This puts you in a better position to bargain on future purchases.

Once you buy your new rental, I would refinance after 3 months and put it on long term financing. Why 3 months? Some banks have seasoning periods. Gives you time to get the place fixed and rent ready. 

Use the funds from the refinance to pay off your HELOC and boom now you have a rental and your HELOC paid off.

I wouldn't refinance your mortgage free house, bc if you do this you will be sitting on cash that you are paying interest on. A HELOC gives you way more flexibility.

This is just the opinion of one person.