Board Topic: Using equity to buy more property
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Using equity to buy more property

Posted by: Chet Nov 2 2004, 02:37 PM
Hi, I'm in a situation that I have a rental unit and am looking at buying others now. I do not have cash on hand but I do have over 100 K in equity. Is there any way that I can turn that into purchase power on other units. Thanks Chet.

Posted by: loanuniverse Nov 2 2004, 04:43 PM
You mention the equity, but you did not mention the market value of the existing rental property. The devil is in the detail as $100,000 worth of equity might not be accessible if the property where you have the equity has a $400,000 loan.

If that is not the case, you can do some quick math to find out how much of those $100,000 are available by taking the market value of the existing property and multiplying it by 20% {the result is how much equity must remain and is not accessible}.

If indeed there is some accessible equity there, then it is just a matter of timing the purchase and the refinancing together in one closing.

Let me run through an example

If the market value of the property is $200,000 then you can probably count on being able to use $60,000 of that equity to finance the acquisition.

You might also want to set it up as two distinct facilities so that you donít have to worry about a partial release of collateral later in case that you sell one of them.

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