Real Deals

How to use equity to build a portfolio of real estate assets

your investment.

Don’t take out more than you can afford. When you take out a home equity loan or line of credit, check your finances to make sure you can afford to pay it back. It is easy to lose track of the money you’re spending, warns Holmes. If you don’t have a solid financial plan, it will be difficult to handle mortgage payments.

Do create a profit and loss assessment. “Whenever I do an acquisition or buy a property, I do a P&L,” Holmes says. “If I buy a property and the roof or heater goes bad, I want to have enough money to pay for repairs and still make the loan payments.”

Don’t take the total loan amount for which you qualify. “I take only the amount I need to buy the property,” Holmes says. “Generally, I pay for any renovations at my own expense, out of my own profit — basically the rent from the rental properties. I don’t take out a loan or acquire additional debt to do repairs.”

A final home buyer’s caveat: know the housing market where you are looking to buy. “You really have to understand what you’re buying,” says Holmes. “You have to be patient, because not every real estate deal is a good one.”

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