School me on "Equity Loans"

[ForeverStrong]

Hey guys/gals,

I just purchased my first property, literally a week ago. I know it is too early to even begin to consider pulling equity out but I was looking to understand how it works, and when you can even be eligible for it. I'm looking for when, as in the soonest date possible I could pull equity and purchase a second property to rent out and be an income property in my portfolio. If any other details are needed, please ask; nothing to hide and want the best advice!

Property I purchased was $330K for a condo, downtown Toronto.

Cheers!

[rennigade]

I have no idea but that sounds like a terrible idea. I have nothing more to add to this other than dont do it. Good luck to you.

[amastewa93]

Yes, you can refinance your property and take some of the equity out. One thing to consider is that cash out refinances are NOT free money, you still need to pay interest in the borrowed money.

You might consider a 1031/starker exchange as an alternative if you have not done so already.

[TexasHusker]

I have no idea but that sounds like a terrible idea. I have nothing more to add to this other than dont do it. Good luck to you.

Once upon a time, I used all of the equity in my home to buy an investment property. I then used that equity to finance two more investment properties, and used the equity from those to open 2 franchises, which paid for another investment property, which paid for yet another franchise location, which allowed me to retire at age 46.

[greenskeeper]

Once upon a time, I used all of the equity in my home to buy an investment property. I then used that equity to finance two more investment properties, and used the equity from those to open 2 franchises, which paid for another investment property, which paid for yet another franchise location, which allowed me to retire at age 46.

Sounds awesome, good for you that you took the risk and made it pay off big time.

I have given though about this (I have about $150k equity in my house) but not sure if I want to take the risk.

[MonkeyMama]

If you have equity, good credit, and the income, you can take a loan now. I'd say that is a question for a lender.

[TexasHusker]

Sounds awesome, good for you that you took the risk and made it pay off big time.

I have given though about this (I have about $150k equity in my house) but not sure if I want to take the risk.

Understood. Originally, I had about that amount of equity myself. I did a cash out refi and used the $150K to pay cash for a rental house. The way it worked out, my rental income made my principal house payment on the new note! (Not including my property taxes).

[97guns]

Once upon a time, I used all of the equity in my home to buy an investment property. I then used that equity to finance two more investment properties, and used the equity from those to open 2 franchises, which paid for another investment property, which paid for yet another franchise location, which allowed me to retire at age 46.

That was the model I was going to use in the early stages of putting together my RE portfolio, my plan was to buy a rental property all cash, take the equity out and buy #2 all cash when funds permitted, mortgage #2 to pay for #3 and so on until I was filthy rich but it just so happened that the housing market crashed and I moved in for pennies on the dollar instead of slow accumulation

[97guns]

With this method I would always have 1 house paid off

[Singuy]

I don't know about Canada but our banks here allow you to pull out 80% of your home equity(loan to value is 80%). You can get a LTV for more but that'll cost you in higher interest rates.

So we don't know if you paid cash or how much you put down on your first property. That plus appreciation will determine how much equity you can pull.

[snafu]

ForeverS: Since the media keeps reporting the TO market is outrageously over priced you are relying on ''luck' to get sufficient equity for our conservative bank loan officers to let you action your plan. You paid C $ 330.K so I suggest you print out your amotorization table for the next 3 years and match those sums with active listings in your building.

Add in your buyer's fees since they will be similar for a loan against the desired equity. If luck goes with you, the condo will continue to rise in value. Talk to anyone in Calgary and they'll tell you how hard it is to manage if you're underwater on housing. [owe more than the sum you could possibly sell your unit + realtor and closing costs]

On the other hand...if the value of units in your building continue to escalate like the last decade, anything you'd like to buy will have likewise, escalated. You will need a bigger downpayment as the rules for landlords are different Worse yet, as a landlord, you get a whole plateful of new problems. How do you vet potential tenants? What if your building or rental suite has an unexpected Special Assessment? [that's when the building has a problem or doesn't meet changes to Condo code and needs C $5K from all owners] What percentage of rental units are allowed in the complex? You may miss that target.

Please talk to someone from the Landlord Society in your specific community [Cabbagetown, Distillery, Yonge etc] about the risks and pleasures of being a Landlord.

[TexasHusker]

That was the model I was going to use in the early stages of putting together my RE portfolio, my plan was to buy a rental property all cash, take the equity out and buy #2 all cash when funds permitted, mortgage #2 to pay for #3 and so on until I was filthy rich but it just so happened that the housing market crashed and I moved in for pennies on the dollar instead of slow accumulation

I would enjoy reading about your pennies on the dollar conquests.

[rennigade]

I would enjoy reading about your pennies on the dollar conquests.

I can sum it up. He bought when the housing bubble burst and it was bottomed out..the absolute bottom. Homes that were once valued at a gazillion dollars were now less than $100k. He liquidated everything he owned, stocks, bonds, 401k, gold, inheritance and went all in. He retired at 39 and never has to punch a clock again. Now he invests in gold and silver products. He spends all the money he has coming in and doesnt save much anymore...no need to. He recommends when showing a unit to sneak out and inspect the inside of a persons car. If its clean and neat they will treat your unit nice and stuff.

[97guns]

I can sum it up. He bought when the housing bubble burst and it was bottomed out..the absolute bottom. Homes that were once valued at a gazillion dollars were now less than $100k. He liquidated everything he owned, stocks, bonds, 401k, gold, inheritance and went all in. He retired at 39 and never has to punch a clock again. Now he invests in gold and silver products. He spends all the money he has coming in and doesnt save much anymore...no need to. He recommends when showing a unit to sneak out and inspect the inside of a persons car. If its clean and neat they will treat your unit nice and stuff.

It's an honor that you're liking me lass and less just like Mark Cuban, I know seeing others succeed is very painful for you

[rennigade]

I didnt want to keep texas in suspense. Anything I said above incorrect?