Posted by Wayne-NC on April 14, 2004 at 20:35:24:
I have done the exact same thing. Now I use a twist which I will share with you to get your opinion. I have been establishing HELOC’s on my rental homes by paying off the first and using the balance for whatever. I now have 1st mortgage LOC’s on 2 more properties. I am careful with my usage of this debt and manage it well. I call this the “money game”. The payoffs are big when you know all the rules.
Leverage - Posted by BEN
Posted by BEN on April 12, 2004 at 21:07:23:
I here stories of people getting rich leveraging there properties. How is this done, it just a home equity line?or something different?
Re: Leverage - Posted by jeff
Posted by jeff on April 13, 2004 at 07:03:23:
Leverage is using equity in 1 property to purchase more property. Equity lines of credit, 2ed mortgage, and putting more than 1 property on a mortgage are a few ways. Leverage is the best way to buy property, but it can also lead to the poor house depending on how well you use it. When I first started I rented my home and purchased another home. Then home equity line of credit on my rental and purchased 3 more rental homes. A year later home equity line on my residence and purchase 2 more rentals, then rented my residence out and moved into another home. A lot of courses and books on real estate finance do not bring up home equity lines because it is not very creative, nor is it no money down (the home equity is your money) but it works. Most terms on lines of credit are interest only for 5 years then a paydown period, they are also adjustable interest rates. I also like the fact I can pay down the line of credit and save interest and if I need money I can pull cash right back out of the line. The key is to get good terms on the property you purchase and in 5 years cash out by refinance and pay the equity line off. If you purchase property below market value in a good area between paydown and appreciation you should be able to pay off the line of credit by refinancing only 1 property. There are also fewer limits on properties to purchase by using lines of credit than some no money down techniques.
Best of luck to you
jeff