Good evening everyone,
I’m willing to learn and very new at this so please bear with…
I just bought my first home; a single family. I’m interested in investing starting w/ multi-families. I have little to no cash available but would like to use my house as leverage towards an investment purchase.
The house was appraised at $260K (a drive by appraisal) and I bought it for $260K. I know i can get more for it since the mean house price in my area is over $290K and I negotiated $20K off the purchase price. The property does need alot work and I could possibly put a small addition to it.
My question is this…if I fix up the property and get it appraised at a higher value (say $300K) does that mean that I now have $40K in equity ($300K-$260K) that I can use towards the purchase of another property?
If so, what is my next step…can I obtain a $40K note from a lender towards another purchase?
Any advice would be greatly appreciated.
Thank you!
Congratulations on your new home.
If your property is in need of a lot of work, then do anything/everyting you can to get that house sparkling (anything visibly wrong is just another negative factor for the appraiser to consider), then get a new appraisal. The appraisal amount minus the amount you owe on your existing loan(s) is the amount of equity you have. Once appraised, contact a lending agent to discuss your various options for accessing your new equity. You may want to consider a HELOC (Home Equity Line Of Credit), as many of the favorable loans require a bit of title seasoning … 2¢
Thank you,
What do you mean by “Title Seasoning”?
Also, could money from the line of equity be used towards pretty much anything related to a new property or are there restrictions?
Most lenders want to see that you’ve owned the property for a while before deciding to refinance, as it shows that you will likely hold the new loan for a while (more money for them). There are lenders that will do loans without “title seasoning”, but most require it.
I would imagine that you could use a HELOC towards a new property, but I have not personally done it, so I am not sure on that. I’ll let somebody else answer that.