In late 2020, one of our clients—let’s call her Jenny to protect her privacy—approached us as she was interested in acquiring an investment property as part of her retirement plan. Jenny didn’t have very much in savings, but had approximately three hundred thousand dollars in home equity.

With some planning, we assisted her with setting up a home equity line of credit (HELOC) to advance the funds she needed for a down payment to purchase an investment property out of town. The investment property was purchased for $500,000 and she needed a minimum down payment of 20% plus necessary closing costs.

The carrying costs on the property including a property manager, property taxes, insurance, mortgage, and line of credit payment was approximately $2,500 per month and her property was rented for $3,000 per month, giving Jenny a net positive cash flow of $500 per month. Thanks to the housing market appreciating in 2021, after only one year of owning the property, the property appreciated in value and was re-appraised for $650,000 in just 14 months!

Jenny was then able to refinance the rental property based on the new value of $650,000 at up to 80% of the new value and was able to pay back her line of credit in full based on the property appreciation alone. She now has plans to purchase a second investment property with the original funds available in her line of credit.

This is how she was able to acquire this property with zero investment at the end of the day. Real estate is a long-term investment, but with the right strategy and timing, acquiring more real estate can be an achievable goal. We invite anyone who has owned property for at least the last few years to contact us to review your long-term real estate plan. We would love for you to be our next success story.