Down Payment For Next Property?
Hello everyone,
I'm a newbie who just recently (2 mths ago) bought first rental property and just got first set of Tenants with about $200 monthly cashflow. I went the conventional route and used my savings for down payment and got a pretty good fixed rate and good terms.
My question is should I use the equity from this property (HELOC or equity loan) for a down payment (which will also increase debt ratio) on next property in order to hurry and get a second piece of property before rates climb or should I be patient and save up my own cash which might take a couple of mths and rates could be higher??
Hey Rodrick, I have done that with borrowed equity , but I never borrow more than 90% ltv incase of non paying tenants or the need to flip it for a better property .
Calculate what your total cash flow will be after acquisition of the second property. If it is greater than on the one you now have, you might want to go for it. You are distributing risk over two properties.
I am not sure you will be able to get a HELOC on your first property. You mentioned you acquired it conventionally. If the terms are also conventional you likely have it financed at/near 80% of value. Most of the HELOC quotes for non-owner occupied properties is in the 50-60% of value range. If anyone out there has had different experience, please let us know.