Borrowing against my Assets to borrow for an investment Property

I have done it numerous times, although never with my primary residence. One issue I ran into was being forced to up my home insurance on our lake house (loan collateral) due to the size of the loan. I buy investment properties and keep an open line of credit. One advantage is this allows me to purchase as a "cash buyer". Often with cash purchases, the seller pays some of the fees that could be split between seller and buyer, otherwise.

Ive done it. But I bought the wrong house.
Investment house.

Complete Diaster.

But im working through it.

What is so risky?

Yeah, after missing 3 deals. I was eager to buy, and bought a house with the worst sellars, convinced I could make some lemonade out of this lemon.

I over paid, and under estimated the work needed.
Got a professional inspection as well. Caught some big red flags, Paid 40k under asking but it still wasnt low enough, should have paid around 60k under asking.

Still isnt rented and toting and I only have 25k left on the loan to finish, still need roof, AC, sheet rock, Cabinets, appliances, Etc.

read this thread

sounds like you need to learn how to run numbers on prospective properties.

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sounds like you need to learn how to run numbers on prospective properties.

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Thanks but this question is more more of a borrowing question and specific to investors that have borrowed against other property or stocks etc. Not so much running numbers on properties. I own my other out of state investment properties outright and paid cash. I am now wanting to borrow against those properties and stocks to not come out of pocket and was interested in the advice from others that have done the same. I don't even have a specific property in mind at this point, cart before the horse situation where I want to figure out the best way possible and get an idea of capital I am able to work with first. Then I will identify the next location and property. I do think I will do Beach and Not mountains this time but that is about the only direction I have.

I borrowed against stock portfolio for primary home down payment. Rate was great initially but variable now at 5-5.25% so still not bad. Negotiate rates don't take first offer or what's published and be ready to switch brokerages if need be. Careful not to borrow too much or you might get a collateral call and assets liquidated. Think they allowed up to 70% portfolio value but I borrowed much less. My broker doesn't even require payments so now I just let the interest accrue as long as rates are below 6% and spend or invest excess capital.

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I have a line of credit that I use to buy houses for cash (mostly sheriff sales).

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I went to the Sheriff Sales and it was nuts in this Area.

Packed rooms and people just running people up to just do it.

Then the people flaunting, just buying houses and bragging about it.

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Sheriff Sales were more subdued over here.

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I probably wont stick in this Area when I finish this house.

Too expensive.

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I am about to retire and that is where some of my concern comes from. Are you worried about not cash flowing a property or some sort of economic downturn leaving you upside down and putting your assets at risk?

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I stopped adding long term rentals a number of years ago, so I might not be the best to answer. I retired from my day job 10 years ago, and only do short term projects now. I have bought a few short term rentals in the past few years with intent to only hold them for a few years, and most of my activity is new construction now. I buy lots or land, hire a builder to build a spec house, then hire a realtor to sell it. These projects have about an 18 month life cycle, so I don't have to make long term projections.

For rentals, I have not experienced any downturns that have ever seriously affected my cash flow. I am in a growth area. My rentals have stayed occupied, so cost increases related to property tax and insurance increases have been the biggest changes to cash flow. Insurance costs have risen significantly in the past 5 years, so know the current numbers and expect them to keep increasing. I never treat maintenance costs as surprises. My cash flow issues happened with long term renters that I chose to leave their rent at same level. Long term renters are worth some cash flow changes to me. . If a STR or when bringing on a new renter, you can adjust rent prices. Investing in a growth area makes it much easier invest in any type of rental investment.

I became a real estate investor using some decent stock market assets to support any financial surprises. Not sure I would do it without a comfortable level of backup assets to deal with surprises. Also, I expect maintenance costs and never act surprised. A property that needs repainting, a roof and/or HVAC replacements are the big items that come with ownership. You can assess and have a plan for cost of those ahead of time. I have never experienced rental price decreases in my area in 25 years of owning rentals. I have seen short periods of home selling price decreases. But they followed recent price increases and were the buyers in the market pushing back on those increases. A growth real estate market is generally an appreciating one. I would only purchase property in a growth area.

What length of mortgage are you planning to use? The risk of becoming upside-down is much shorter if you use a 15-year mortgage compared to a 30-year. I used 15-year mortgages, so equity increases at a pace that works in your favor. I would find several successful realtors in the area to gain insight on the market. The caveat is to do your best to find good realtors to talk to, as there are more bad realtors than good ones. Bankers are also good resources for market information. Builders, too. I use all three professions as information resources.