Alright, let’s talk home equity lines of credit or HELOC’s as they’re known.
Using a home equity line of credit to buy a rental property is a fantastic way to get started creating legacy wealth for your family. The first step is to make sure your current home will appraise well, so that means getting the house ready. Let’s say your house is worth 100K make sure the house looks like it is worth 100K.
Next you need to shop around at a few local banks for the best rate. Many will offer an introductory 1.99% loan for the first year. Make sure you’re asking for a home equity line of credit not a home equity loan. The line of credit is revolving and evergreen. If you get a loan they’ll write you a check and then that’s it. So make sure you’re getting a home equity line of credit.
Many banks will give you 80-90% Loan to Value on your equity on your primary residence. So let’s say you owe 50K on your loan and the house is worth 100K… that’s 50K in equity. Well the bank will typically give you 80-90% of that equity. That’s $40,000 to $45,000. Which is a perfect amount to buy your first rental property.
The next step is to identify a rental property and we can talk about that next. And the next next step is to take out HELOC’s on your rental properties and begin to explode your legacy wealth. Bam!
Click below to download my Freedom Number Cheat Sheet. It’s the first step in your journey to build passive rental income. It’s free!