Pull out appreciation to break even and/or buy 2nd property

[Kapil Patel]

Hello BiggerPockets friends,

I guess I need some help in understanding the benefit and strategic advantage of cashing out appreciation on a property and using it to buy another property.

If I appraise a property, I am borrowing that against another loan to pay some of the original mortgage and/or buy second property? But what I do not understand is you still have to owe on another loan.

Also, I want to know if this strategy not only helps in buying another property. But mainly to contribute towards my first property principle to break even when I rent it out. I guess my question is is this the best strategy or are there other strategies to break even on the first property to be able to be ready financially to buy a second property and keep the first one. I guess I do not see it any other way except putting in your own cash.

Thanks,

Kapil

[Brent Coombs]

Originally posted by @Kapil Patel:

@Brent Coombs I appreciate your feedback. Say I pull out my equity (your reference to "all your deposit back"), then wouldn't the monthly mortgage go up? So renting it out would be difficult, the whole idea is to increase principle so I can break even on rental / mortgage???

Also, what about pulling cash out based on appreciation. (I assume this would be another loan, which would be pointless to borrow against your own profits, basically depreciating the appreciated profits by borrowing against it).

 It's not "pointless", because you do get to buy more property/ies by doing so!

The monthly mortgage going up does not make it more difficult to rent out. But yes, finding deals where refinancing your deposit back and still cash flowing positively can be difficult - but not impossible! Hence, before buying, always ask yourself - is this deal a real "deal"? Cheers...