i am purchasing a property in NC for 85K. the property is owned free and clear by the seller. i have structured the deal to include a down payment of 40K with the remainder due in 1 yr at 0% interest. i am taking the 40K out of equity in another property i own for the down payment. this property is in pretty good shape and should rent for @$600 with little work (maybe a fresh coat of paint and a good cleaning).
My question is A: is this a good investment and B: what should i do with the equity? (i thought I could invest in yet another property) I will have 45K due in 1 yr.
Not really…it will, in all likelyhood, NOT cashflow…if you have to make big downpayments to cashflow, it’s not really a cashflow, it’s a MONEY PIT.
<< B: what should i do with the equity? (i thought I could invest in yet another property) I will have 45K due in 1 yr.>>
What equity? Let me make sure I understand this: You are paying $40K down (using a HELOC on another property)…then, in a year, your owe the balance of $45K…in a year you will not have $45K due, you will owe $45K.
Am I missing something?
Let me clarify,
I have consolidated some debt into a HELOC to include 40K in equity into my first home. (payment will be the same as sum of all debt payments). I am getting into this property with that equity. Once I close, I figured I would get a home equity loan or line of credit of 85K, invest 45K for a year and pay the balance of the contract, the other 40K i could possibly flip into another proerty. I will be renting the property for $600/mo to cover new equity loan. Am i missing something?
You will have a VERY difficult time getting a HELOC on a secondary property, the reason being that it is not your “home”…I buy properties for cash, fix up, get a higher appraisal, then finance them as a rental property (about 1/2% higher rate), and get all or most of my money back out and then repeat.
In order to get you capital back out, might I suggest doing that – before the 1 year is up?
Thanks Keith for the advice.