Please Help - Financing question

I am thinking of ways to finance my down payment on an investmet before I get to the point when I need to act. I have a home equity line of credit on my home and I have paid approximately $5500 on that line of credit in approximately five months.

Would it be a good idea to take a $5000 loan (as allowed by my lender) against my home equity line of credit to purchase my first investment home? I figure since the money is already there to take, I won’t have to get creative for financing (opening savings accts, credit cards, etc.). My interest rate right now is appx. 7% on my home equity line of credit.

I’m just wondering if I will run into any problems or legal/tax issues?



Howdy Nlong:

What are you waiting on. I wish I could borrow $5000 at 7%. The only problem I see is that you are waiting on the money before you look at deals. Find great deals and you will have no problem finding the money. I was getting lunch yesterday and told an old friend what i was doing and he said that if I had a deal he had the money to be partners just out of the blue I have another source of money to do deals not from a pencil neck banker but a friend I coached basball with years ago.

You could lose the $5000 too and that could be a problem. Find a good deal with some equity. If you pay retail and you are forced to sell the property you may not even recover the $5000. If you buy even at 10% below retail and have to sell you may even make a few bucks. Always get an equity position when buying. It costs too much to buy and sell, commission, fees etc.

If you are buying to resell then you will need even a better deal especially if it needs rehab.

How about getting the seller to take back a second for the downpayment and putting the minimum down the lender requirement. What’s wrong with getting creative?


What do you mean by taking back a second? How does this process make it more creative? I’ma a novice, so please excuse my ignorance.

Taking back a second means that example- you find a $100,000 homes and you can get a loan for 90% or $90,000, now you have to come up with 10% or $10,000. Now a second means if the sellers is willing finance or take back some or all of the 10%. Some lenders will only allow 5%-7% on a deal like this, so you would have to come up with some but not the ful 10%. So that in a nut shell is what a “second” is. But if you have a great credit score you can get 100%. Just for a heads up this site has a great section with real estate terms in it.
Happy Hunting

Thank you visionary for that reply. Basically that is what I had in mind to tell this investor. Get creative and ask questions of lenders; they have the money, go and get it.

Getting creative is FUN!