How to use a property to your advantage

Hello Convoy,

Before you buy any properties you would have done your due diligence, so you would know exactly how much equity you have in the property. You can work with your real estate agent to have them run "comps" (comparible properties that have sold) in order to determine the FMV (fair market value). Let's say you buy a home for 150K & it has a FMV of 200K - you would then have 50K in equtiy. Once you own the property you can use that equity to either rehab the home or use the line of equity to purchase another property.

Also, if you plan to pull equity out after you own the property, know that you probably won't be able to get access to ALL the equity. For example, using Coach Drew's numbers, even though there is $50K of equity in the property, the bank may only allow 70% or 80% of the appraised value to be lent. Say 80% LTV. The property is worth $200K. They would lend $160K. Therefore if you already have $150K into it, you could only get an extra $10K out in a refi, and a lot of that would probably be eaten up in closing costs. So you want to make sure you get a REALLY, REALLY great deal to start with if you plan to pull money out in a refinance.