Posted by Robert Staats on September 19, 2003 at 10:03:11:
Free advise is what it’s worth, so here goes. Unless you live in a “homestead” state, I would think it makes more sense to use your home equity line with the lower interest rate. If things go south, unsecured creditors can still go after your house. The potential exception is if you live in a homestead stae like Florida, where your personal residence is protected from bankruptcy proceedings.
You might also look for 90% financing instead of 80%. You’ll probably have to pay mortgage insurance, but you’ll be able to buy two houses instead of one with the same money.
Can anyone tell me the best way to finance this because I am at the crossroads without a plan. I want to buy rental for $100,000. I could use my line of credit as 20% down and finance the rest, I could use a personal loan as down payment and finance the rest to keep my home clear. My line of credit is 3.5 under prime and if I get a credit increase to $250,000, my interest rate will be 3.25% under prime. I only owe 98,000(my home) and I plan on paying it off in less than five years. Another alternative is to use a unsecured line of credit for 20,000 and finance the rest.
Any suggestions to help me with my first property? Should I wait on paying off my own personal bad debt or continue
to make time on my equityline?
you can get rich doing deals like this. i have done 7 purchases in the last 2 years paying all cash (getting a good price) for SF fixers (or other problem). after problems are fixed, get a cash out refi to pay down your line. this way you maintain flexibility, high leverage, low loan fees. the main reason it works is you buy wholesale, and take the risk out of the deal, then take the package back to the bank. i have more money available to me now then when i started, plus 7 homes. and i would also say my banker loves me.