I just had a quick question.
Let’s say I am going to buy a property right now and I need to come up with 30k.
I have:
Can I / Do I:
Thanks
Howdy Evergreen:
Your question is not that quick to answer? What are you buying? Is it a million dollar property or a $30,000 property? Is your equity in your homestead or a rent house and what is the value of that property? If it is your homestead here in Texas you can only borrow 80% of the value in a HELOC so depending on the value you may not be able to borrow against it. We are also assuming you have good enough credit to borrow at low rates.
I would prefer to borrow and keep the cash as reserves. Some investors do not want to risk losing their home and may not want to borrow against it.
I probably made your question too complicated but there are a lot of factors to consider.
It would be off a homestead prop in Nevada. Even if there is some 80% rule, or less, the equity is there.
My fico is about 640-650 right now, but I always do stated no doc loans so I am basically in the 80% boat.
I would be buying either a duplex or single family. Cost would be unknown. It was just an example question.
A more real example would be if I found a duplex in State X for $50k. Would you use your cash or equity (if that is even an option).
Is it uncommon to get the seller of a duplex to carry 10%? Or is this not a great idea? On a 50k prop, I could put just 5k down @10% down verses 10k @ 20% down, which frees up capital for other things.
You may want to first decide why you are investing. Is it to do flips for fast money? Are you looking to build long term rentals? A combination of the both? other?
Even if you never use it, you would be well advised to get a home equity on your home. This gives you the ability to buy immediately for cash - at least up to the amount you have available. It is easy to then get a loan on the property you have bought and return the money to the home equity to use again.
It is either very expensive or impossible to get an immediate loan on a purchase but easy to refinance
If you are going to use traditional bank money they will not alow you to cross collateralize the equity in your house to get a loan and a HML or commercial lenders WILL.
So if you are going to use a bank you will need to get a CO refi to get to the cash to utilize it for down payments or closing costs.
Banks only care about the liquid cash others do not
so it all depends on the style of how you want to invest like consultant was saying.
Laura,
What do you mean when you say “need a CO to refi”?
Also you said the bank will not let you cross collateralize money? If I understand that right you’re saying that one CAN’T take equity in one property by means of a HELOC and use it for a downpayment, closing costs on a new property? I have never done this before so I am confused. I’m pretty sure a lady I work with has done this before…
any insight?
CO refi means Cash Out Refinance it is getting a refinance after you purchase a home and getting cash out
Also you said the bank will not let you cross collateralize money?
Cross Collateralizing means to cross security pledge for the payment of debt.
using house A’s equity and putting a private note on house A and using that note for and on house B for down payment. (never exchanging cash)
If I understand that right you’re saying that one CAN’T take equity in one property
No what I was saying banks want CASH not a security pledge
by means of a HELOC and use it for a downpayment,
HELOC are OK because you are converting a HELOC note into CASH which is what a bank wants
closing costs on a new property? I have never done this before so I am confused. I’m pretty sure a lady I work with has done this before…
Yes I am sure she has used a HELOC for cash for a down payment and/or closing cost that is just fine with getting a bank loan
any insight?
Does that help you?
Thanks so much Lara you have been most helpful.