Using cross-collateralization as a method of down payment

[Ilya G.]

1. Hello,
2. I have several SFRs that have lots of equity in them and I wondering if anyone used a method of cross-collateralization to pledge the equity as collateral, thus avoiding doing a cash-out refinance or HELOC. It seems like a good strategy but would appreciate any advice and if anyone worked with banks/lenders that provide a service like that.
3. Thank you in advance!

[Brandon Croucier]

There is a product for this, but honestly its going to be more along the lines of hard money.

You are going to save $$$ by just simply doing a cash out refinance and using that as your down payment; especially if you have good credit.

[Erik Estrada]

Quote from @Ilya G.:

1. Hello,
2. I have several SFRs that have lots of equity in them and I wondering if anyone used a method of cross-collateralization to pledge the equity as collateral, thus avoiding doing a cash-out refinance or HELOC. It seems like a good strategy but would appreciate any advice and if anyone worked with banks/lenders that provide a service like that.
3. Thank you in advance!

 It's a very risky strategy if you do not have a solid exit. It will also be more expensive than just looking into a line of credit with a local bank. 

Is the goal to flip?

[Andrew Zamboroski]

Quote from @Ilya G.:

1. Hello,
2. I have several SFRs that have lots of equity in them and I wondering if anyone used a method of cross-collateralization to pledge the equity as collateral, thus avoiding doing a cash-out refinance or HELOC. It seems like a good strategy but would appreciate any advice and if anyone worked with banks/lenders that provide a service like that.
3. Thank you in advance!

When I have seen this done or done this for clients, the properties being crossed are generally refinanced into the same loan, replacing your first lien (blanket/portfolio loan). Not every lender may do it that way, but that will likely be the most common method. The lenders I have seen that will cross properties as a second lien are generally strictly hard money or asset based.

[Michael Ohara]

@Ilya G.Hi, how much do you need for a down payment?

[Ilya G.]

Guys, Thank you so much for the advice! I am new to multi-family so just been reading, researching and 'talking' with ChatGPT :-). 
Once we done preliminary underwriting on the multi-family in question, if everything looks good, we will need about $1.5m for down payment and closing costs.