Can the downpayment equity from a 1st income property be borrowed and used as downpayment for a next property?

Suppose 100k of cash is put down with 400k borrowed on property A. Assuming the debt is covered by the income and the 1st property is solvent, can you use that 100k as downpayment for property B. If so how do you "get at it" to use it. Also if so then can you do this for property C, D, E and on and on.
In Buying Property - Asked by Larry K. - Sep 3, 2009
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Answer(s)

Chris G.
Broker/Agent
Lynchburg, VA

The only example I know of that is relatively close to what you are describing would be to "cross-collateralize" the properties. You may have enough equity in property A that if it is combined with property B you can borrow enough money to satisfy all of the debt on both properties, or cover more of the downpayment requirement. I have seen this done quite frequently, sometimes encompassing 5 or 6 different properties. Talk to a lender.
An example would be: Property A is worth $100,000 and you owe $50,000 against it. You want to buy Property B at $100,000 and the bank is requiring 20% downpayment ($20,000). You may be able to package the two together ($200,000) and you need $40,000 total equity in the deal. You could possibly borrow money against the two properties letting your equity in Property A cover the requirement for both.

Sep 4, 2009
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Paul S.
Broker/Agent
Glendora, CA

Today's lending climate will probably make it hard to do? If the property first purchased is a commercial property you only have 25% equity in it. It would be unlikely that today you would even be able to purchase it with only 25% down let alone pull cash out. If it is residential 1-4 units you might be able to buy with 25% down but you will encounter real difficulty pulling cash out. Lenders are very aware that equity can evaporate quickly in a declining market.

Sep 8, 2009
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Gregory G.
Broker/Agent
San Francisco, CA

As Chris mentioned you can do this with a conduit loan.
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Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com

Oct 23, 2009
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