Home equity loan vs cash for down payment

[Irina Badal]

Hi. I’m new to BP. I would like to buy my first investment home. I have built enough equity in my primary home. I have cash too. What would you advise to do to pull some equity to pay for down payment and invest cash into syndication with 17% annual return or just pay cash for down payment. What would be the wise thing to do ?

Thanks for your input. 

[Benjamin Aaker]

Sounds like you are considering two deals, a purchase of a single-family residence (SFR), and investing in a syndication deal. They are very different and you really should decide on one.

1. SFR is active. You have control over it but it will be a lot more work. If you get a line of credit on your primary residence, the new purchase must have enough cash flow to pay its own loan and the line of credit. Don't rely on your personal income to pay this back - it's a big mistake.

2. Syndication. You'll need to do a lot of work vetting the syndicator and the deal. 17% sounds fantastic for annual return, but that's unlikely in the first few years. It's probably an estimated annualized return after the deal is completed. The money is tied up in the syndication and very illiquid, but it requires no work from you after the initial vetting.