The Investment Strategy to Buy Real Estate with Almost Nothing Out of Pocket!

Phil Gustin • September 30, 2024

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How New Investors Can Use Home Equity to Buy Investment Properties

As a new investor one of the most powerful tools you can use is the equity in your existing home. Home equity allows you to access funds to buy investment properties without using your savings. Here’s how you can use it to grow your portfolio.


1. What is Home Equity?

Home equity is the difference between the value of your home and the amount you owe on your mortgage. If your property has increased in value or you’ve paid down a lot of your mortgage you may have a lot of equity to use for new investments.


2. Home Equity Loan vs. HELOC

Two ways to access your home equity are a Home Equity Loan or a Home Equity Line of Credit (HELOC).

  • Home Equity Loan: A lump sum loan with a fixed interest rate makes it easier to budget for payments.
  • HELOC: Like a credit card with a revolving line of credit you can borrow as needed often at a variable interest rate.


3. Equity for Down Payments

Once you have accessed your home equity you can use it as a down payment for your next investment property. This is especially useful if you’re buying a rental property as it reduces the need for upfront cash while still allowing you to generate passive income from your investment.


4. Benefits of Leveraging Equity

Using home equity to invest in real estate has many benefits:

  • Lower Interest Rates: Home equity loans and HELOCs have lower interest rates than other types of financing.
  • Tax Benefits: Interest paid on a home equity loan or HELOC may be tax deductible depending on how the funds are used.
  • Building Wealth: By using your home equity to buy an investment property you’re using your existing asset to build long term wealth through real estate.


5. Get Advice

Before you get a home equity loan or HELOC talk to a mortgage expert to help you understand the pros and cons. Click the button below to schedule an appointment with me, Phil The Mortgage Pro, about real estate investment options that suit your unique financial situation.

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