Posted by Michael Morrongiello on November 23, 2000 at 20:51:36:
My .02 cents says to not invest any funds unless you are able to realize a cash on cash return on the dollars invested. Buying a multi family rental property which in my book is a managment intensive type property is not wise especially as my first investment property. If you cannot negotiate the sale price or financing terms so that you can realize a positive cash flow that is significant, then leave this on to someone else.
As for using your equity that you have built up in your home. You might consider pulling out some of that equity through a cash out refinancing, especially if you can borrow long term (30 years) at a nice low rate of 8% or less. In a simply example, if you can pull out $100,000.00 and invest that money wisely and carefully into other investment properties, fixers, notes, etc. where you can earn a 12% compound rate of return. Then after 6 years you’ve doubled that money to $200,000.00. Now ask yourselve this question? Will you home go up in value by $200,000.00 (almost a 60% increase in value) to $475,000.00 in 6 years?
Weigh the opportunity cost of that “dead equity” that you have in you home but is not really earning you as much as it might be able to if it was invested in other investments.
Hope this helps,