Profile picture for polanco613

investment property reserves

Im planning on purchasing an investment property ..and im a little confused on the reserves needed ( 6 Month PITI) can i use my current homes equity ...im already using equity (HELOC) for for the down payment
  • November 19 2012 - US
  • 0Yes

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Answers (2)

I don't know what area you are in and your strategy. Are you going to try to flip or buy and hold? You are going to have a mortgage, a HELOC payment and a mortgage on the HELOC property? What is your exit strategy?
 You are digging a hole if it's a buy and hold. Will the rent pay enough to cover your payments plus turn a profit ? One major repair can kill your reserves and a vacancy can pull you right under.
  • November 22 2012
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Profile picture for wetdawgs
Lenders refer to the liquid assets remaining after you've purchased the property as "reserves".   These can be bank accounts, stock accounts, gold bars under the mattress or other liquid assets.  The objective with reserves is to have sufficient money to be able to pay both mortgages for six months.  As you've already spent the current home's equity for the down payment, that can't be counted as part of the reserves (it would be double spending)

  • November 19 2012
  • 0Yes

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