David Leveraged His Equity to Fund an Investment Property

It’s a good time to own property in the Grand Canyon State. Home values in Phoenix have grown faster than any other U.S. city year over year from 2019-2020.

With property values increasing at historic rates and an influx of people moving to the west side of Phoenix, David and his wife knew they had an opportunity to add another income stream in the form of an investment property — but only if they could act fast and obtain substantial capital given the increasingly competitive real estate market.

Having just recently refinanced, David knew he’d likely need to put their investment property plans on hold for a while to secure the funds with another refinance. But waiting meant watching the home prices grow and inventory shrink. That’s when David discovered Hometap.

“When I heard the [radio] ad, it was the first time I’d ever heard about that concept of selling equity and basically taking on a partner in my house,” said David.

David had been through the process of utilizing a home equity line of credit (HELOC) before, too, so knew he was looking at a 6-7% interest rate if he went that route. 

Self-employed and working for the family business, the lack of a standard W2 could add another challenge to the refinance and HELOC application process. He continued to mull over his options.

“I couldn’t do a refinance because I just refinanced in September. It would have cost quite a bit to do a refinance within that period of time, even though the [home] value had increased,” said David. “And there wasn’t much chance of getting a better interest rate because it was already at 2.99%. Unless I was to move to a 15-year term…which in that case would have made my payment much higher than I would’ve wanted.”

After walking through several scenarios with his Hometap Investment Manager, David had made his decision. On top of being a solution with no monthly payments or interest, Hometap’s 20% annual appreciation cap and downside protection put him at ease.

“The Hometap route was attractive because of no ongoing payments, I had a view of opportunity costs and [I had an] underutilized asset. [That] was a motivating factor, as well as accessing the equity in a timely manner without tacking on additional monthly obligations.”

After a few weeks, David and his wife closed on a Hometap Investment and began shopping for their investment property.