Ask Cornerstone: Strategy to raise capital through current assets?

Raising capital strategies with current assets

My wife and I are new to the United States.   We own two properties and need some ideas to get cash together for future investments.  We’re cash poor right now and have limited income, but we have the following assets:

  • Single Family Home: Its value is $950,000 (purchased in 2009 for $710K) and it’s fully paid off.
  • Muti-Family Home: Its value is $1,000,000 (purchased in 2001 for $780K) and it’s fully paid off.

The multi-family home clears about $5,000 a month in income. It’s our only source of income given we only have a residency visa right now.  We want to increase cash flow by flipping cheaper single family homes or purchasing new rental property.    What would you recommend to pull out the most amount of cash for the least amount of interest with low risk?  

You have few good options to get working capital to generate more income and build your net equity. I assume that you and your family came to the US with sizable amount of cash to be able to amass over $1.5M equity in real estate. Consequently, I conclude that you and your family are hard working and capable individuals and you know how to save.

Your first good option is to get FHA loan on your main residence. I believe that you could qualify for $300K to $350K loan below 4%. This would give you cheapest working capital available.

The second way requires some sacrifice which you might be willing to make to assure much faster growth and better future. You can sell your primary residence and free about $900K of capital. Then you finance the purchase (not cash) of a smaller residence or nicer condo. For example: if you buy $500K condo and put $200K down payment you will have $300K loan at 3.5% or less. YOU CAN AFFORD THAT!

At the end you are left with $700,000 working capital without any payment or points. YOUR FUTURE IS GREAT!

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