Financing First Rental Property

[Jorge Vazquez]

Hello my name is Jorge I live in Springfield MA and I currently have a single family home that I currently own and live in. The value of the property is estimated to be at $244,000 and currently owe $173,000 so I'm trying to find the most efficient way to leverage the equity in order to buy first rental property. 

[Randall Alan]

Quote from @Jorge Vazquez:

Hello my name is Jorge I live in Springfield MA and I currently have a single family home that I currently own and live in. The value of the property is estimated to be at $244,000 and currently owe $173,000 so I'm trying to find the most efficient way to leverage the equity in order to buy first rental property. 

 @Jorge Vazquez

@Jorge Vazquez

Well, unfortunately the best way I see is probably to sell the house if you want the best way. The problem you have is that cash out refinances, where you can pull money out of your house’s equity require you to leave 25-30% equity in your property.  Using the numbers you provided, you only have 29.1% equity in your property… so the MOST you could look to pull out on a refi is about $10,000… and it would cost you $5,000 to do the refi…AND your interest rate would shoot up because rates are really high right now… like mid 7’s for a refi.  Selling the property you would net much more that you could put towards maybe a duplex where you could live in one side and have your renter next door pay your entire mortgage.  Now you can build equity in your rental property, plus save lots of money by not paying rent and put those savings toward a new property for yourself. Once you have that down payment you move out of the duplex and now you have 2 rental doors earning you income.   that’s probably the best way I see to it. 

You can inquire about a Heloc, but I think their reserves will be similar.

All the best! 

Randy