How’s Your 2022 Going So Far?

It’s been a while! Over the past few months, we got married, moved to TX, converted our home in the Bay Area into a short-term rental, and got into a contract for another 7 units for our portfolio.

One cool thing we tried when we purchased our 7-property portfolio was cross-collateralization.

Cross collateralization is when you take a piece of property that you own free and clear (or have a lot of equity in) and use that equity as the down payment for the purchase of your next investment.

As an example, let’s say investment costs $400,000, and putting 20% down would normally require us to put down $80,000 of our own funds into the deal. Instead of putting the cash in the deal, I can allow the lender to cross collateralize a property (that’s worth over $100,000) that we own free and clear!

This way, we can use the equity that we have in one of our properties instead of putting our cash in the deal, and it’s easier/cheaper than doing a cash-out refi to pull equity out of the property.

Cross collateralization isn’t always an option, and it increases our risk because we’re adding more leverage to our portfolio overall. But when we can come into a deal to purchase 7 units with no money in the deal, it’s a hard thing to pass up.

What creative financing strategies have you used to get deals lately?