I may get a variety of responses but considering a refi and one lender has a proposal that I can bring 2 properties plus cash out for renovation work covering 2 or 3 properties under my main home as there is equity there. The upside a better rate on all the financing the downside my main house is at risk more than previously ... Not sure if the collateral will ONLY be the main home or at least one other being paid off is listed if they are considering that, probably a large factor to consider ...

This particular loan officer brought it up so more creative than most bankers seems to me ....

Anyone else been thru this ?

I believe in managed debt to grow your business.

If you need to put up additional real estate in addition to your personal home, I'd lean towards a general no without specifics to change my mind.

If you do put up your home, can you afford to make the payments, no matter what?

Most lenders play that game, giving you an easy loan on your primary residence. When I went to my bank for a real estate loan, they tried every way to give me a loan on the home I was living in. I told the banker I had six homes within throwing distance of the bank branch and they were all paid off with no mortgage. I wanted to either get a first mortgage or a line of credit. Since I wasn't living in those 6 homes, they didn't have a product to lend me money on a current owned rental, only a loan for the purchase of a new rental property.

A whole different method of financing- credit cards. Zero interest credit cards, to be precise. Not for the forgetful, the overspenders, and probably not for those who don’t want to spend a bit of time each week checking on the balances, tracking what’s expiring soon, and looking for new offers.

This is also a really good way to kill your credit score, albeit temporarily, and with purpose. When I wanted to get rentals, my husband wanted no part of it, and I had recently quit my job. He didn’t want to use home equity in any way. OK, he just didn’t want me to do this, period. But, I’d had an 850 Transunion and Experian credit score for years, and I live in a community property state. I’m legally allowed to use his income, without his credit being pulled. He is required to get notification of the debt, because, in my state, the debt belongs to the marriage.

Now, when I started, banks were offering zero fee, zero interest, for fifteen months, back when the economy was tanked. Best I can get now is 3% fee, zero interest for fifteen months. There are threads on this forum about using credit cards for financing. It is definitely NOT for everyone. I had taken my excellent credit score all the way down to the high five hundreds with cash advances to purchase two homes, repairs/improvements to all four. Back up to bouncing between mid and low seven hundreds, not higher because I have a couple of cards with zero interest near maxed out. When one card’s low rate expires, I have to know where I’ll transfer to, lest I pay high rates. About half of my debt is at zero percent interest, and about half is between four and nine percent. Some of that personal loans to refinance the credit cards.

Husband is now very ‘on board’ with me having rentals, said just the other day he wishes HE had bought ones I had been trying to convince him to buy back in 2012! Haha! My personal life has gotten busier, so not acquiring more properties. My goal is to have all the credit card debt paid off before DH (dear husband) retires in a few short years. Should be able to meet that goal. Easily, if only one of my two older roofs needs replacing before then.

I guess what rate are you getting?

I have a heloc on my primary....no mortgage....2.75% no closing cost. 80% ltv

I have loc on 75% of appraised value by drive at 4% on a couple rentals

That you don’t have sufficient cash reserves to renovate is concerning.

If you are going to add significant income by way of the renovations it sounds like a viable plan.

On the other hand, if renovations are not likely to increase your income significantly, you should consider selling and redeployment of your funds because the loan term will outlast your renovations.

One of the biggest mistakes RE investors (real investors) make is not using every available piece of credit to GROW your plan.

When I hear things like I would never use my home for credit-- I cringe-- what does that say? I don't trust my investing? You have got to use your assets and get them working for you.

Now I'm not saying for ever and ever-- but once you get to your comfort zone-- now start zeroing out your debt.

Always sounds good that you have 100,000.00 in equity or I own my home free and clear. I get that. The plan you have is to get the money working for you-- not sitting.

Our parents did a disservice to us growing up about being DEBT FREE.

I have used my primary residence on numerous occasions in getting low interest loans (heloc) to build my business. I actually had no choice because without a W-2 day job, banks would not loan me a penny to buy any of the Class C and D dumps that I needed $5-$10K for. I have even used credit cards to buy houses with.

Good responses everyone, I hear all that .... I have one more discussion with lender probably today but the proposal now fees a little too much, certainly comparing to Jason comments. The possible upside could have been no actual appraisal walk thru of my home but they are pulling that back. So shopping a bit more looks like. I am playing that game with zero rate credit cards as busy described and in a few years that should be all gone if I stay on track ...

Roy that was good. I use the digging hole and when you see water coming in-- STOP DIGGING.

Myob,

Roy I'm sure you remember Carlton Sheets. In our younger days we use to watch him and even now remember his students bragging-- "I brought this 10 unit apt building NO MONEY DOWN! -- my first deal" or "I brought 10 duplex's on my first deal".

My wife and I would look at each other and joke-- lets see this train wreck in a year or two. Of course we all know what happens.

As with our dig a hole example: dig to quick, without experience, allows the water to rush in and DROWN US!

Absolutely do NOT put rental investing on your home. If your investments to date do not support themselves, then it is common sense that putting your home at risk is a terrible idea.

I used to be one of the most frequent, direct voices on this board regarding not borrowing money to invest. I've toned it down over the years for several reasons, but the general thoughts are still the same. Investments should carry themselves.

If you're going to borrow the money, borrow it against the property itself. If you can't, then that (usually) means there's something lacking with the idea. Banks will loan on good, low risk investments. That's why they want your home as collateral: they know you'll drive yourself to the breaking point before tossing them the keys, and in the meantime you'll keep it in good shape. They win either way.

I 100 no make that 1000% disagree with Sid.

There is no sound reason a compident person-- being one who has done his homework-- can't invest home equity in RE. Due diligence.

I will admit that I know very little about getting loans, however, I have to wonder where your reserves are, and are you getting interest on them. If they are sitting in the bank then you are probably not getting much interest, and you are losing value of that reserve due to inflation. So, why not give yourself that loan, and make those monthly payments with interest to yourself? I am still learning about the financial world though, so I will follow.

Well 6 the "still learning" just ain't gettin it. You'll be old and decrepited and you'll still be learning. My dad would say this to you-- crap or get off the pot!!!!

I belonged to RAND in ATL back in 87. People who were on the BOARD-- were still waiting on the perfect deal.

Most here all started with nothing. If I lose -what do I go back to-- that's right nothing. Your not going to lose. You've read, you've studied, you have people here to guide you and care about you.

Lets all face it. Most had nothing in the bank-- but may have equity on their home place-- that equity is the same as money in the bank that's also not drawing any interest for you.

For me..

My reserves are my loc/heloc

myob, I see your point about the equity, so I guess there really is no difference there. What always enters my mind though, in these discussions, is the fact that you would be paying interest on a loan just to leave money sitting in the bank. Why do that?

6 don't understand your statement: you would be leaving money in the bank paying interest on it?

The HELOC is an open equity fund. You don't take it out - your draw on it. So if you need 10K for a RE purchase-- you take 10K out and pay interest on that. Same with a draw on a 401--- you borrow what you need and then start paying it back.

Ken nothing comes without risk. But it is risk/reward.

The 'WHAT IF'S WILL GET YOU NOTHING IN LIFE.

Before answering your question what is your DSCR?

If they are not paying you 1.2 or better, smack yourself to wake yourself up and look at your properties for ways to increase your cash flow.

I go with no but also hard to keep up with how much interest for each house when looking at profit for each. Find a small local back or credit union