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All Forum Posts by: Shelon Hutchinson

Shelon Hutchinson has started 8 posts and replied 31 times.

Post: Getting a 2nd mortgage for a third property

Shelon HutchinsonPosted
  • Rental Property Investor
  • Pensacola, FL
  • Posts 32
  • Votes 42

Hello Sarah,

  Congratulations on on real estate wins.  Having equity in a property is amazing for a number of reason.  The one I'll focused on is directly related to your question of: "would I be able to get a traditional bank loan off the equity of my (future) duplex plus the equity from the single family home I have paid off or should I find another option for financing?"  

It it very natural to associate bank with loans but I have learned in recent years that a Home Equity Line of Credit (HELOC) is more beneficial. One of the things I like most about the HELOC is the flexibility that it provides. Your HELOC provides you fast cash that can be used for any reason. Second think I about the HELOC is that as you pay down the principle, that amount becomes available for use. Take for example, you got approved for a $50,000 HELOC, you withdraw $20,000 to buy a property that you are going to renovate, you use an additional $15,000 for the renovation, total withdraw is $35000. Your After Repair Value (ARV) is $56,000 you refinance 80% of the $56,000=$44800. You then pay off the $35,000 balance on the HELOC and pocket $9800. Your credit line will be back at $50,000 and you just repeat the process.

**Number did not factor in closing cost and other fees.