4 ms·
>They buy a property, rent it out, then use it as collateral for another rental. I'd like to know which lenders allow you to do this, given a standard mortgage
by gruez 10mo ago
>They buy a property, rent it out, then use it as collateral for another rental.
I'd like to know which lenders allow you to do this, given a standard mortgage starts at 20% down and needs to be paid down from there. Unless you're committing mortgage fraud you can't exceed whatever initial leverage you started out with.
- bluGill 10mo agoIn a few years you have enough equity in the old that the difference is plenty to make that 20% and still have 20% in the old.
- gruez 10mo agoWhere's all the equity coming from? Keep in mind when you're buying the house in the first place, you're competing with other people who are also potential renters. They're incentivized to bid up to whatever their rents are, which also happens to equal how much you can hope to earn by renting it out. If anything they're willing to bid even higher, given how people are irrationally attracted to housing, and how much you can hope to earn is even lower because you have costs they don't. Banks won't give you preferential rates either, because some lending to some DINK household is going to be much less risky than lending to some landlord that's levered to the hilt. Your equity accumulation will be glacial, barring change in the macroeconomic, which is by no way assured. Or mortgage fraud.