Author Topic: Home equity leveraging on rental unit  (Read 1260 times)

Drifterrider

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Home equity leveraging on rental unit
« on: October 21, 2015, 01:02:13 PM »
I own a SFR in NC.  Market value is about $100K.  Rents for $800.  Mgt fee $80, net to me of $720 per month.

I want to borrow $50K against it.  PITI would cost me about $400 per month.  Who has done this with a SFR in that market recently?  What institution did you use?  Would you recommend them?

MetalCap

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Re: Home equity leveraging on rental unit
« Reply #1 on: October 21, 2015, 01:16:41 PM »
You can use any bank or lender you'd like, check out Bigger Pockets for people who've done it before. 

Just out of curiosity, the few numbers you gave don't seem like enough.  Is the house paid off? Normally a cash flowing deal is around 1% of the house value in rent a month.  Also the management fee isn't the only expense.

Drifterrider

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Re: Home equity leveraging on rental unit
« Reply #2 on: October 22, 2015, 04:47:07 AM »
You can use any bank or lender you'd like, check out Bigger Pockets for people who've done it before. 

Just out of curiosity, the few numbers you gave don't seem like enough.  Is the house paid off? Normally a cash flowing deal is around 1% of the house value in rent a month.  Also the management fee isn't the only expense.

I own the house.  Yes there are other expenses:  taxes and insurance.  If I take a mortgage the @400 per month would include taxes and insurance.  At present I pay them at $150 per month cost (taxes paid annually, insurance paid monthly) which averages $570 per month to me.  With a $400 monthly PITI payment I would net $320 per month.  Income taxes are not included in the above figures.

Yes I can use any lender I like.  I wanted to know of any of the readers here have done this in that market (specifically NC).

Bearded Man

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Re: Home equity leveraging on rental unit
« Reply #3 on: October 23, 2015, 10:33:28 PM »
While true that you can use any lender you like, you could try Lending Tree and see what you come up with. Or shop a broker for the best rate. I've considered doing the same thing on one of my paid off rentals, but I think I'd rather 10-31 exchange it and get three similar properties with leverage. It's not in the best location, on a busyish street.

Right now I'm still thinking about it but just sitting on it until I know for sure it's the right thing to do. The house has gone up in value, more than doubling in the past five years. Rents are great, but my cash on cash return is so low now that I would be better off putting it into the market. Either that or 10-31 it and buy three leveraged properties with the money in the same area but not on a busy street. That would give me high returns initially again, but as the price rises and the mortgage is paid off, my returns will drop drastically once again.