Have you ever wondered how to use the equity in your home to buy an investment property? We’ve all heard from one source or another that investing in real estate is the way to go. Fun quote: “90% of millionaires have invested in real estate”.
As a home owner who has a desire to start investing, what are your options? If you have owned your home for at least five years, you likely have enough equity in it to do something called a home equity line of credit. You can use that home equity line of credit to take out a loan and use it as a down payment on a rental property.
When purchasing a rental property, you can buy with either 10% down, 15% down, or 25% down, depending on the loan type. Have the numbers run to see which would be best for you in your situation. Remember- a larger down payment means taking out a larger loan from your home equity line of credit.
Whatever property you purchase to rent out, you WILL have to make a payment on it, so make sure that the rental amount you charge will be enough to cover the loan, with some left over. We aren’t simply talking your rental amount minus your mortgage amount (example, 1200 in rent and a 1000 mortgage would have 200 left over) because there ARE other fees and costs you need to be prepared for, such as a management company to get and keep a renter in your home. (That can be up to 10% of your rental amount.)
For me personally, I lived in my first two rental properties first, meaning that I bought the home, lived there for a period of time, THEN moved out and rented the property. After those first two homes, I didn’t want to keep moving every few years, so I utilized the 10% and 15% down payment options for my third and fourth rental properties.
Being able to invest in rental properties has been a great investment route for me and my family. If you feel like it might be something you’re interested in, feel free to message me with any questions- it helps to get advice from someone who has lived through it before!