Forgotten Your Password?

Need to Register?

Question Icon

Is this financially smart?

Is it a good idea to use equity from your first home to buy a rental property? by makarow500 from Arkoma, Oklahoma. 22 days ago Reply


Henry J Daniels, CMPSI, CMHS (HenryJDanielsNationalMortgage)
#12 ranked lender in Texas - 142 contributions

While taking money out of your primary residence is a good way to tap equity as to whether or not it's a good idea that money is used to invest in real estate depends on your risk tolerance because after all you are adding additional debt to your home and that may not be in your best interest. I would check with a Certified Financial Planner to see what all of your options are and make a decision what is best for you and your family.

22 days ago
0
0
Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 1,904 contributions

The first question to answer is do you have the temperament to be a landlord. It is not all Collect the rent and pay off the mortgage. With the right tenants it can be that simple, but unfortunately, there are many tenants that call you at 3AM because the toilet is overflowing, or bail on you in the middle of the night, etc. Let's assume you do have the temperament. Picking the right property, in the right neighborhood is critical for success. If you have a CPA or other mentor with expertise in the property rental market, pick their brain. You will want help in proper budgeting for active expenses and have a reserve for unexpected expenses and repairs. It is important to try and keep your cashflow as close to positive as possible, but with enough reserves, a small negative cash flow can become a strong positive cashflow in a few years. If you are stretched too tight and the tenant bails on you, leaving a trashed unit, do you have the resources to do the necessary repairs/remodel to get it rented while cover the mortgage until it is? These are all things to plan for. As a landlord myself, I have found that owning other properties that someone else is paying for is wonderful. I've had my ups and downs with tenants, but over time learned that being willing to trust my gut in saying NO to an iffy applicant and just sucking up another month's mortgage payment is often better than the nightmare the iffy tenant became a short time later. Finally, My mentor told me that if I did not have 6 payments for my home and 6 payments for the rental that I could afford to lose, I had no business in the rental business, because if I was that tight financially, one bad tenant could cause it all to blow up. So, to answer your questions, Yes, it can be financially smart AND financially rewarding to borrower some of your equity to acquire your first rental property. Hope this helps. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We got you covered. NEXA Mortgage is licensed in 46 states ~ www.ApplyYes.com 480-889-9000.

22 days ago
0
0
Subscribe to our news feed.