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Sparetimeinvestor

Home Equity Line of Credit

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Hi,

 

My wife and I are in the process of building a new home. Our current home has 50K in equity and we are thinking about keeping it on a rent to own basis for one year.

 

I am thinking about getting a home equity line of credit to use as my downpayment on the new home which I woulc pay off when my house sells to a tenant buyer in 1-2 years.

 

Any concerns that I am overlooking with an equity line or things I should be careful with?

 

Thanks to the board CPA I already know I have 3 years to sell to avoid capital gains.

 

Kurt...

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Any concerns that I am overlooking with an equity line or things I should be careful with?
Just the usual, Kurt. Will the rent you expect to receive on your present residence cover your expenses? Will the HELOC create a negative cash flow? And what if the property is vacant for any period of time? Is there a Plan B in your bag?

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Kurt,

 

If you can use your equity line to rev up your real estate business with confidence of low risk I think it is definitly a viable way of getting started. You have the advantage of being the actual owner, and are benefitting directly from the cash flow and back end, as well as all tax benefits.

 

The property also will show a strong posative cash flow if later you decide to pursue other investment properties. I have definitly seen RTO reduce clients DTI (Debt to Income) from 55% to 47% making it much easier to lend to.

 

The other advantage is you can assist your clients in the mortgage process by keeping all checks paid, and all contracts handy. If you have a good TB in the property you will find it easiest to give your friendly mortgage broker a complete package ahead of time so s/he can begin the Refi process.

 

And yes, I am a Mortgage Broker :huh:

 

Best wishes,

 

Mike Pine

:ph34r:

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