Unusual financing dilemma

So here’s the story: a few years back I inherited a condo that at the time was marketed for ~$500K. This was in DC. I own it free and clear. Pretty lucky, I know, and I also inherited a bunch of cash that I’ve been spending on living expenses (I’ve been working only part time while I’m in grad school). I have about $50K in liquid assets.

The point is, I’d like to leverage this major asset of a condo to purchase more real estate. (But I can’t sell the condo because my fiance likes it too much.) I haven’t settled on any particular investment strategy because I’m stymied by the financing issues. I can get a home equity line for $150K at Prime -1, but I don’t think I can get much more because of my low income. Does anyone have any ideas? Is there any angle I haven’t considered?


Why would you sell it if it is in DC (with the property value KEEP RISING) and when you inherited it??? If it was worth 500K then WHAT IS IT WORTH NOW??? Unless you really want to get out of it for the cash… BUT THAT’S NOT AN OPTION we see :banghead WITH THE FIANCE’. You could pull money out of it to finance any deal you do and keep that valuable piece of property. CASH always outweigh income! Will $150 allow you to make more investments??? IF SO GET IT…and what kind of investments are you seeking??? P.S. Rather your fiance likes it or not…if that property can start you on your investment career to produce mega $$$ I AM SURE SHE WOULDN’T MIND!! :biggrin

I am sure you could get up top a 60% loan - and possibly up to 70% value just on the value of the condo - your income not to matter. You can set aside part of the loan to make the first 24 paymetns of the loan - so income would not be an issue.

That would work out to about:

$500k FMV (maybe more, but this is what we have to use)
$300k (60% Loan @ 8% -maybe more or less depending on your credit and actual income)
$ 2,201.29 a month payment (P&I)
$52,830.96 24 months of payments

$247,169.04 available to invest, minus loan costs, origination points and the like.

What I could do with almost $250k cash to invest. :biggrin

Although the OP could leverage his condo up to 60-70 LTV using a NO-DOC cash out refinance approach, I wouldn’t suggest it.

A more prudent and risk averse approach would be to use a HM rehab loan to leverage the purchase, cost of repairs & closing costs and use a small portion of his/her equity for cash reserves and or to satisfy the liquidity requirements of the HML (reserves to service the HM loan and the HELOC/HEL and repairs reserves for overruns and unforseen problems, etc.).

The OP is new at this and betting the ranch on the first deal is too high a risk IMHO—if the “what if’s” should arise, his current income status wouldn’t allow him/her an easy recovery/exit plan (If you should use a 10-15K HELOC for short term cash reserves requirements and transfer 99% of the risk onto the lender and the worst case arises, a modest adjustment to monthly income is the only thing required to exit/recovery relatively unscathed).


Scott Miller

Thanks to you all for your advice. Much obliged.