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Rookie Reply: How to Use Home Equity to Buy Rentals
Description
This week’s question comes from Tony’s Instagram direct messages! This rookie real estate investor is asking: I have a good chunk of equity in my home, should I pull out cash to purchase a rental property? If not, what should I do with the equity?
If you want to know how to use home equity to buy real estate, you need to know your options first. As many homeowners are sitting on massive equity gains, thanks to the past two years worth of price run-ups, they’re asking how they can use this equity to their advantage. For most investors, you’ll have two options in how you take this equity out of your home’s value. But, both of them need to be intelligently evaluated before you make a decision.
Here are some suggestions:
Look at your current mortgage rate and see if it’s higher or lower than today’s average interest rate to refinance
Ask your lender about a HELOC (home equity line of credit) as well as the terms, interest rates, and duration offered
Interest rates are likely to rise, so locking down a great rate now may help you in the future
Know your exit strategy (flip vs. BRRRR vs. buy and hold) for each different kind of financing option
And more in the episode…
If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).
Links from the Show
Real Estate Rookie Youtube Channel
Real Estate Rookie Facebook Group
Check the full show notes here: https://www.biggerpockets.com/blog/rookie-196
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