How often to visit the home equity well?

Question

Hello folks. I'm new to real estate and have a question relative to tapping into my primary residence equity. My home is worth $1.3M appraised and it's all free and clear. I want to use up to $750k as down-payments on 30-year fixed mortgages for 3 or 4 multi-family rental properties. The plan is to buy, refurb, rent, and hold the asset long-term.

The deals are going to come along sporadically, of course, so I'm wondering how to structure the equity transactions so the cash is there when I need it. I want the freedom to move quickly when I find a good deal. Should I take out one $750k refi, and sit on the cash until I need it? Should I take the first, say $250k, and refinance as each deal comes along?

I'm moving methodically and working with a trusted realtor, financial planner, and my bank of 15 years. So, this is probably just the first of a bazillion questions I'm sure I'll post to this amazingly helpful website. Thanks in advance for your help.

Scott Jensen · Answer

@Joseph Ritson There's a lot of different ways to do it. You probably don't want to refinance one property a bunch of times. Closing costs on all those refinanced could get expensive. If I were in your shoes I would figure out how much the down payments will be on 4 properties, refinance for half of that amount and then take out a Home Equity Line of Credit for the other half.  You'd save a lot on closing costs and gain a lot of flexibility with the Home Equity Line of Credit.

Chris Coleman · Answer

@Joseph Ritson have you considered starting with a HELOC?  In that way, you’re not paying interest on money you’re not using.

Joseph Ritson · Answer

Scott and Chris, thanks for your reply. I have a $250k heloc now; it is on the table to add 250k to that, yes. I think you're both saying the same thing: leverage a heloc as much as possible before considering refinancing. Makes sense. Thanks again.