The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

REAL ESTATE Buying on current equity..

Remove ads while supporting the Unscripted philosophy...become an INSIDER.


New Contributor
Read Millionaire Fastlane
Oct 1, 2007
If I had a home with $40k in equity and use it to put 10% down on 4 $100k houses, wouldn't I run into some debt to income ratio? Why would the bank continue to loan me the money? I'm just unclear how that works. Thanks.

Don't like ads? Remove them while supporting the forum. Subscribe.


New Contributor
Aug 12, 2007
You are right, in this situation the bank would probably not lend you money. Leveraging equity occasionally happens in the residential market, but is more common in commercial lending.

For example:

You own a $5M dollar income producing property.

You owe $2M on that property. 40% LTV

You then do one of 2 things:

1. Open up an equity line to 70-75% total LTV - $1.5-1.75M to use as a down payment on other properties. The lender calculates the debt service (or ability to repay) off of the income on the subject property, not the property that the line is being used to purchase.

2. Many banks will allow you to leverage that equity to purchase the new property. So, you are esentially getting 100% financing on the new property, but adding your existing property (the above mentioned $5M property) to the collateral pool to secure the lenders interests.

When the bank is underwriting the transaction, the properties would have to be able to cash-flow on their own, the owner may have to meet net-worth and liquity requirements, and the equity position would have to be favorable to the bank. This type of structure is typically only available to seasoned property owners.


New Contributor
Aug 6, 2007
Depends on what your debt to income would be.
If your buying a 4 plex or 4 houses the story would be the same.
When you own properties you fill out a schedule of real estate owned.
They want to see equity in those properties but my understanding is they are focusing on the rents being 1.25% of the mortgage payments.
They figure that 25% is lost to expenses.
So your debt to income is based on more than just YOUR income.
Which is a good thing !
They also like to see that you have some money in the bank. So that you can weather a storm.
I think with all the bank troubles they are getting tougher. Yet I still get things about refinancing or equity lines daily .

Sponsored Offers

  • Sticky
FEATURED! Introducing... WEALTH EXPO$ED, A Short Story By MJ DeMarco
Hi Mj, I just bought it. And reading it. I think is a great idea to write using the stories to...
  • Sticky
MARKETPLACE Fox Web School "Legend" Group Coaching Program 2020
Great post @Fox, very much appreciated! How can I reach out to you? I sent you a PM a while...
  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
Hey @Lex DeVille ! Having some issues with the NOREGRETS code? Udemy thinks it has expired...
  • Sticky
MARKETPLACE Grow Your Business With a Book (An Unorthodox Marketing Strategy That Built One of the Largest...
Are you looking for a new, lesser-known but potentially very lucrative source of leads to your...
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Just got off the phone with @LightHouse. Having just a 45 minute conversation with him has...
  • Sticky
MARKETPLACE Kill Bigger Incubator
@Kak Thanks for the reply. Whats interesting is that I have an idea that's been cooking which...

Forum Sponsor


New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom