think of it in terms if who has the “mortgage” on the property. if you buy a house cash, there is no mortgage. if you then want to pull that cash out, you do so against the value of the home. that cash isn’t free. a bank or lender will give you that money using the house as collateral. you then begin making mortgage payments. second scenario,lets say you buy a 100k house and put down 20%. abc bank gives you the other 80k to buy the house. your mortgage is 80k. you then have mortgage payments from the time of purchase. assuming all is well, time passes, the house appreciates to 200k, and you qualify as a borrower. you then think to yourself okay, i want refinance and pull cash out of the house. most banks and lenders will give you 75% of the value, or in the case off 200k, you can access 150k of that value. but the doesnt mean you get 150k, because you still have the original mortgage to pay off. at closing, they will pay off the original 80k mortgage, and you will keep the difference in cash. for simplicity’s sake, the above would net 70k in “cash out”. you now have a mortgage on the property that is 150k, and the original mortgage of 80k will be considered “paid in full”

Do you think a seller would ever do it with 0% down, or using another property as collateral?

Thank you Houston, Texas (suburb, Alief, TX) for my 1st real estate transaction.The Houston economy was so bad, I talked a local bank (who was a client of mine) into making me this very small loan and I would put up the condo as collateral.

I will be asking the banker this but want to survey before I do.Has anyone used their equity as collateral in an acquisition, but not via a HELOC?

The property being rehabbed is used as the collateral so the creditor normally wants to see that the property can be sold at a profit even if the borrower defaults on the original hard money loan.

Aren't you giving the investor any collateral?

The rents and leases are already pledged as collateral to the first position mortgage holder.

banks are going to want 25% or more down for non owner occupied properties.Getting over the 25% down hurdle is an uphill battle.we've had success getting small amounts of owner carry but had other free & clear properties to cross collaterize.

You could carry that difference under a separate note at a higher interest rate, you could carry it as long as you feel comfortable with being in a sub-2 with another lender.If you sell, you need to give notice on a interest only call note, if he can't cover it you need to pay it, and you could keep that note with him or proceed under the default provisions and seize collateral.

One thing worth of noting on the LLC subject, some banks don't finance the property if it is under LLC for the reason that LLC has little to offer for collateral.