Utilizing equity

[3canctheayr]

Hi everyone-



I have some equity in a couple properties and I'm interested in hearing ideas on how to creatively access it.

One property has about 40% owner equity, but doesn't free cash flow* very much right now- maybe $50-100/month. (it will cash flow better in a few years as the units turnover).

The other has about 25-30 % equity and free cash flows* about $4-500/month on average. The properties are owned by a holding company. Assume neither property will see significant appreciation in the next few years. Assume neither property will require significant major repairs, or upgrades in the next 5 years.



* I use clear cash flow, or free cash flow as my term to describe the true net cash flows out of a property net of all direct and indirect expenses, maintenance,depreciation(upgrades), vacancies and all other associated costs, such as book-keeping etc. I want to know that whatever cash is left, is really what is left, or free.



Can this equity be accessed? If so, How would you access this equity, assuming there is currently no other supporting methods, such as personal lines of credit, employment income etc.,etc. ie. the propeties themselves have to entirely support themselves in every which way.



Thanks,



Brian

 

[Thomas Beyer]

Five options



a) do nothing as is it too tight anyway,

b) refinance the properties,

c) get a line-of-credit ( LOC ) behind the first,

d) get a second mortgage

e) get a corporate LOC



Option b is best as it is the cheapest, assuming no or low payout penalties. c) would be the second but banks rarely go above 75% LTV but one of the two properties have some room here. Talk to your bank about it. Option d likely makes no sense due to cost of 10%.



Option e, the corporate LOC secured by the two properties and you personally, will likely be more expensive than one specific to one property but provides the most flexibility.