Investing With A Home Equity Line Of Credit

I have heard that taking the equity out of my houses to invest in real estate is a great option. what exactly are the inner working of this? Won't i be having two mortgages that have to be paid from rental income? any advice and resources or links would be appreciated.

I don't think that's a great option. Yes - you have have two extra mortgage payments. If you rent the property out - is the rent going to be high enough that it will cover both of these? If not, you will get negative cash flow - and then what happens if you need to make repairs? You'll have to take out more loans.

2008-06-24 07:41:30 by senzualsindhique

When looking for a home equity line of credit, consider the repayment period, the interest rate offered on the loan and the projected income over ...

I have heard many stories and lectures of using one's equity to invest in property. I am still trying to breakdown the numbers because even if i put 10 percent down from my HEloc, i have that loan, a mortgage on the property, taxes, insurances, and any other fees for one property. Hopefully my rent will cover all these expenses but i might be negative. so what exactly is the strategy for this. please let me know. all ideas welcome, my property mortgage is 400,000 and its value is 750,000. how can i maximize my equity?

There are several ways to invest in property. However, today's market is not for the newbie. You need to know how to do market research, be able to analyze path of progress data, understand the market you are investing in, have a good attorney, which is easily the biggest challenge since they all think they know real estate, be a marketing specialist to get a good deal, be able to negotiate with sellers, be able to fix up and repair, stage and finally sell your home to realize your return. And when you have finally mastered that, you are going to have to be an expert at managing cashflow.

You also do not want to be putting ten percent on anything if you have to come up with the other 90% as collaterlized loan unless, as you rightly point out, you can come up with the cash flow to cover two mortgages. the other problem is that if you catch the investment bug, you will find that this strategy will not work when traditional lenders cut your supply of money off after a few houses.

I think the solution you are looking for is how to invest your money from your equity line and gain a higher return on the money the equity line is costing you and still be safe. Why not become the bank? As an investor, I am continually buying, and pay extremely high interest rates because the availability of money is what is important to me. Your loan would be secured by a recorded mortgage at 65% of fair market value, which means that not only do you make a high return on your money, but you also have the guarantee of having a property with lots of equity in it as collateral.

email me if you would like to chat more about investing.

davidlitterick@optonline.net

2008-05-15 22:50:18 by senzualsindhique

To pad my cash cushion in case my business needs it, before the credit window closes, should I draw from my available line of credit at 5% APR and invest it in CDs or High Yield Bonds @ 4% and pay the difference as a cash insurance strategy?

So long as they are short term investments and you don't tie the cash up should you need it. Sure, how can you beat a 1% loan? Just don't forget to factor in that you will be paying tax on the 4% interest. So, the loan will actually cost you more than 1%. You might see if there are any short term municipal bonds even if the interest isn't as high, you wouldn't have a tax liability.

Your question is a good one, you should access the money while you still can. put the money to work for you, and make sure you do it in the most efficient way tax-wise. Perhaps your business can write off the interest paid on the loan? Probably not, since it is on your house, but maybe there is a way of lending the funds to the business from you personally. I don't know the answer to that-- I think you should talk to an accountant. Good luck!

Incidentally, my friend had an equity line on his house ( untapped= for emergencies) and he got a letter from his lender, they are out of the equity line business! They cancelled it flat out!

2008-11-16 16:34:56 by Simon

I hear the phrase many time" it’s better to be cash Rich and equity poor then Cash poor and equity rich " Everyone recommends taking the equity out of your house and investing it because the market is slipping? They say if your house looses value 20K, you just lost that 20K because you did not pull the money out.....

But what is your "portfolio investment” don't yield as much as you interest on the Home Equity line of Credit? Also what if your house is work 200K, and then you pull that equity and the value drops, then what? Are you upside down?

I simple can't understand the urgency for people to do this unless then are paying down high interest credit cards?

What do you think?

i think you should leave the equity in you house alone. It is a loan against your house and if you have a lot of credit card debt you could end up loosing your house over it because you have a huge loan against your house and it is because of your out of control spending.

2007-09-10 19:01:26 by Chris J

I hear the phrase many time" it’s better to be cash Rich and equity poor then Cash poor and equity rich " Everyone recommends taking the equity out of your house and investing it because the market is slipping? They say if your house looses value 20K, you just lost that 20K because you did not pull the money out.....

But what is your "portfolio investment” don't yield as much as you interest on the Home Equity line of Credit? Also what if your house is work 200K, and then you pull that equity and the value drops, then what? Are you upside down?

I simple can't understand the urgency for people to do this unless then are paying down high interest credit cards?

What do you think?

No, not really true. First, real estate is for most people primarily a place to live and secondarily an investment.

When you say "pull the money out", unless you actually sell your house, all you're doing is borrowing money against the difference between what your house might be worth if you did sell and what you still owe. If you do borrow that money and have trouble repaying, or if your equity drops below what you've borrowed, there's a good chance you're going to lose your home. Then, instead of paying down the loan on your home, you're going to be throwing it away on rent.

What most people who are contemplating what you've described wind up doing is wasting the money they get from the home equity line and wind up losing the house instead.

Don't do it unless you know exactly what you're doing.

2007-09-10 19:03:13 by Chris J