Home Equity Line Of Credit For Investing?
I am looking at maybe getting a home equity line of credit from my primary residence (my actual home where myself and my family live) in order to start investing in some real estate. I dont have the cash on hand for closings or the 10% down that I am going to have to have in order to purchase the places that I want to purchase.
My question is, has anyone gotten their start using this route? Is this generally a good or bad idea? What are the upsides as well as down?
Thanks for any insight.
Did you pull out a lump sum and use for downpayments? Did you use the cash flow from the properties in order to pay back the equity loan?
Thanks for the info.
Leveraging your equity is a fantastic thing provided you invest properly. Know exactly what the rental will bring vs. PITI and know that your HELOC is tax deductable for the first 100K! If possible, place 20% down to avoid pmi. Good luck
I did the same thing as well. 3 rules to follow in my book.
1. Only buy properties that will cash flow positive after ALL expenses. Otherwise you can not pay back your HELOC.
2. Make sure you are paying back your HELOC monthly. This is the hardest thing. That way once you pay back the first amount you used from your HELOC, you can do it all over again.
3. Realize that you are pretty much committing yourself to your current primary residence for a long time. With all your rentals tied to the HELOC, your primary residence is pretty much the mother ship that everything feeds off of.
I have access to a business line of credit that is unsecured, stated income, no asset verification with a minimum fico of 660. Anyone can apply. I use it as short term hard money even though it only cost prime.
(5.75%). I also utilize a heloc on my home.
kevin
What do you guys mean by seasoning?
Excuse the ingnorance, I am still a newbie.
No problemo, seasoning refers to a unit of time, when talking about seasoning of title, that means that is has been deeded to the same person for a length of time, some lenders require 12 months of seasoning, some require 6 months, some lenders have no requirement on seasoning of title.
You will also see lenders require seasoning of money, this means money used for down payment they like to see that it has been in your account for 60 days.
HTH
[addsig]
I use hard money for purchases. My hard money guy will loan 100% of the purchase price. Then I either sell, or refi if it is a rental. My refi has no seasoning but will only do 75% LTV - so you have to buy right. But the 75% LTV lets you avoid PMI. I use my HELOC for holding and rehabing costs.
Brenda
Maybe I am missing something.
You want the partner to fund the repairs, obtain a loan and provide a down payment to you for a property with limited equity then I assume split the $300 to $500 cash flow.
What would be the payback for assuming all of the risk?
Is this a hot appreciation area?
this is not a good deal for a esperience investor to consider, if the monthly cash flow is only 300-500, why would a investor split that and give a down pmt, when they can purchase a home to rehab or investment property, and get the same cash flow without a partnership. My best bet for you is to borrow the money to fix the other unit and repay it back. You should try a local bank and ask for a 1 year loan on 2-5k
have you looked at raising funds thru a private placement or reg d exemption?
You are welcome Ed, Dave.
Thanks for the suggestion; I have not yet looked into the private placement scenario, figuring that it will require the use of in-house salespeople or an outside marketing organization to "pitch" the idea to investors.
Ed