Leveraging Home Equity

[Tyrone Harris]

Hello

I'm new to the group. What's the best way to leverage the equity in my home to invest in rental properties?

Thank you!

[Jennifer Serviss]

@Tyrone Harris

Yup! My example would work as follows:

- Refinance your current residence and cash out your equity

- Take the equity from the refi (and any additional funds you want) and purchase a property in a solid rental area that needs improvements. The repairs needed will depend on your experience level and your comfortability, however you are looking for a property that you can buy at a discount, improve for a budgeted amount, and has an ARV that allows you to cash out your investment. I recommend David Green's Buy, Rehab, Rent, Refinance and Repeat book for a great amount of insight on the process.

- After the new property has been rehabbed and rented out, you get a new mortgage on it - cashing out your initial investment (refi funds) and sometimes more and repeating the process with the same funds.

- So you are essentially, taking the same funds from your cash out refi and using that to buy more rental properties all while increasing your monthly cash flow with each purchase. 

This is just a high level overview of the process so I would definitely recommend educating yourself on the details but I have personally done this and love it! There are many podcasts and the book I mentioned above are very helpful so be sure to check them out!