Leveraging the AIO for Real Estate Investing

Because the AIO turns a fixed mortgage into a HELOC with a credit limit of up to 80% of your home’s value, it can be a powerful tool to help homeowners harvest their equity for investment opportunities.

Consider a hypothetical scenario: Due to market inflation, your home is worth $600,000 and you owe $150,000.

Refinancing into an AIO would create a credit line of $480,000, which is 80% of the home’s value.

Since you only owe $150,000, you now have access to an additional $330,000 on the line of credit. You could put a cash offer on an investment property or condo (for up to $330,000), pushing your offer to the front of the line, and skipping the laborious and expensive process of securing a second mortgage, qualifying to carry a second loan, sending documents in to underwriters, etc.

Another option would be to put just 20% down on that second property and finance the rest. You’d use $66,000 of your HELOC and then apply for a 2nd mortgage on the 2nd property.

Legally, any individual can have two AIO’s at any given time. You could setup a second AIO on that investment property (or go with a conventional loan); either way, you’re only investing $66,000 on a $330,000 property.

If that property appreciates 10% per year for two years, it’d then be worth $400,000. While you only invested $66,000 up front, you sell the property and keep the difference. So your initial investment of $66,000 becomes $136,000–in two years.

This is why real estate investments are so solid. What stock could compete? In the stock market, you’d have to invest maximum amounts to get decent returns. In real estate, you can invest just 20% of your funds, then leverage other people’s money (ie, the 80% you are borrowing) to generate future equity, all of which you get to keep when you sell.

Partnering the AIO with an Investor Cash Flow loan is a popular choice as the AIO frees up equity for a strong down-payment, and the Investor Cash Flow loan lets you qualify on an investment property using only the prospective rental-income from the property to do so. No need for tax returns and paystubs, we use the appraised rent value to qualify borrowers. To learn more, click here.