Use HELOC For Down Payment And Cash Reserve
I have 3 rental properties with good equity (about 30-40%). Each property worth about 170-180K. I don't want to refinance them because of the good interest rate. They are all 15 yrs term. I want to buy more properties but thin of cash. I am thinking to use my primary resident HELOC for down payment of new properties, use one of my investment property HELOC as my cash reserve and leave alone the other 2. I have some more liquid assets such as mutual funds, stocks and bonds. My FICO score is around 750. Am I taking too much risk? Any of you believe in Real Estate bubble? I don't have good deals. I am just trying to take advantage low interest rate and depreciation sooner. Any input will be appreciated. Thanks.
[ Edited by ew86 on Date 12/23/2003 ]
[ Edited by ew86 on Date 12/23/2003 ][ Edited by ew86 on Date 12/28/2003 ]
You could look into cross-collateralization.
If you are not looking for a day-to-day active role in your real estate investing, do not over extend yourself. Although there are plenty of ways to push the limits on what you can buy and borrow, if you do not predict the market well it will be hard to recover if you do not have the time or skills necessary to adapt.
You do have considerable equity and you should find that banks will likely lend 75-80% of the value on your current properties. They will want as many properties as they can get so don't give away the farm.
Keep in mind that cross-collateralization ties up your current properties and can make it very difficult (or impossible) to sell your properties if the need arises.
Good luck!
Except in certain parts of California, there is no real estate bubble or anything close to it. It is nothing but media hype so they can call the next big thing
Quote:
On 2003-12-28 14:55, bigcraig79 wrote:
Except in certain parts of California, there is no real estate bubble or anything close to it. It is nothing but media hype so they can call the next big thing
Unless you are an economist, I wouldn't try to predict where or where not there are real estate bubbles. Experts do say that there are bubbles in certain areas and not just pockets in CA. Try a google search using the word's "real estate bubble burst" and you'll see areas listed that are most likely to downturn.
When the high tech craze was reaching it's climax, there were experts predicting it's inevitable fall and others calling these predictions media hype. There is also the theory of the Real Estate market mirroring the stock market -- just years later... we've seen the rise and some experts think the falll is soon to come at least in areas where the supply exceeds demand.
Not to be harsh... but don't just brush off expert analysis as hype.
I think your idea is excellent!!!
There is no over extension in getting the credit. It is like a credit card. You don't pay until you use it. Regardless of future investments, I reccomend it. I would use washington Mutual for your personal residence. 90%LTV at prime...4% or so. FICO/Stated on that one. Takes a 5 min app and they approve you the next day.
Further investment is a different question. I would continue to buy smart, but never feel that you have to buy now. Use the same principles that got you what you have, and walk away if the price is not right. Real estate will not go down in 2004, but that does not mean it is time to buy foolishly.
[addsig]
P.S. I am no economist....but I do have a degree in economics from UC Irvine, if it makes a difference to you.
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I use a HELOC for purchasing properties. For me the key is to use this only for buying at a discounted price where the property can be refied to paydown your HELOC. Preforeclosures, rehabs, REOs are good candidates for this strategy and it does not depend much on future economic performance if you are quickly turning the property or inventorying it as a rental (cash flow is the key here).