What is a Home Equity Loan?
An equity loan is simply a loan where more than one property (asset) is used as collateral, which means that it is positioned as the security for loan repayment. It is synonymous, for our purposes, with a home equity loan. Property managers use collateral loans to position rental properties as collateral to secure funds against a fix and flip project or renovation needs. This is a common method for using less capital to fix and flip houses.
With Intrust Funding, there are two stipulations for cross collateralized loans: (1) homes used as collateral must be within Western Washington, and (2) these homes cannot be owner occupied.
Equity Loan Example
You own a beautiful vacation home in the San Juan Islands worth about $300,0000, but sadly you only make it over a couple times a year. So you have it listed on Home Away and Airbnb. And because it earns good rental income and is fully paid off you decide to keep it in your portfolio. Meanwhile, you find a great project to flip, the purchase price is $500,000, and you think that it is going to need $90,000 to get it market-ready in 6 months with an ARV of $775,000. Intrust Funding will secure a collateral loan by going in first lien position on both your vacation property in the San Juan Islands and your new flip project. Now, when you secure a home equity loan, bad credit does not matter.