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Mobile, manufactured, modular. These types of homes sound similar, and they’re all prefabricated, but they differ in cost, customization, ease of financing, and in other ways, too.

When it comes to old-style mobile homes and modular vs. manufactured homes, here’s what to know if you’re considering a purchase.

What Is a Mobile Home?

Unlike a stick-built, or traditional, home built from the ground up, a mobile home was built in a factory before mid-1976. Original mobile homes looked like trailers, or campers. They have wheels and an exposed coupler for a trailer, making them easy to hook to a vehicle and move. But the name is a bit of a misnomer: Most are never moved.

Original mobile homes aren’t built anymore. They don’t meet the current safety standards, even if interior renovations can make them look appealing.

What Is a Manufactured Home?

A manufactured home is built in a factory, then transported to its destination in one or more sections. Sound familiar? That’s because manufactured homes are the 2.0 version of mobile homes.

In 1976, the U.S. Department of Housing and Urban Development (HUD) changed the “mobile home” classification to “manufactured” legally and began to regulate the construction and durability of the homes.

More change and innovation have come with time. That is covered below.

What Is a Modular Home?

Modular homes start their lives in a factory, where modules of the homes are built. The pieces, usually with wiring, plumbing, insulation, flooring, windows, and doors in place, are transported to their destination and assembled like a puzzle.

Modular homes are comparable to stick-built homes in most ways other than birthplace.

Recommended: Choose a Favorite From the Different Types of Homes

How Mobile, Manufactured, and Modular Homes Differ

These homes may all share a starting point, but there are key differences to know, whether you’re a first-time homebuyer or not. For the sake of simplicity, let’s compare manufactured homes and modular homes.

Construction

Manufactured homes are built from beginning to end in a factory on a steel chassis with its own wheels. Once a manufactured home is complete, it’s driven to its destination, where the wheels and axles are usually removed and skirting added to make it look like a site-built home, or it may be attached to a permanent foundation.

Construction and installation must comply with the HUD Code (formally the Manufactured Home Construction and Safety Standards) and local building codes.

Modular homes are built in pieces in a factory, then transported to the property. From there, a team assembles the home on a permanent foundation.

While a modular home may be built states away from its final home, it needs to comply with the state and local building codes where it ultimately resides.

Design

There’s a fair share of design differences when it comes to modular vs. manufactured homes.

Manufactured homes come in three standard sizes:

•   Single-wide: roughly 500 to 1,100 square feet

•   Double-wide: about 1,200 to 2,000 square feet

•   Triple-wide: 2,000+ square feet

The most significant limiting design factor of manufactured homes is the layout. As they must be delivered fully assembled on a trailer, they only come in a rectangular shape. In the case of single- or double-wides, there’s not much space to separate rooms or interior hallways to connect them.

In terms of design, there’s much more freedom in modular homes. They can be just about any style, from log cabin to modern, and can have more than one floor.

The design options of a modular home are similar to a stick-built home. Floor plan and style are only limited by a buyer’s budget and space. A modular home may look just like a site-built home upon completion.

Customization Options

Most makers of manufactured homes allow some customization, including:

•   Custom kitchen layout and cabinetry

•   Porches

•   Custom layouts (within the confines of prefab shapes)

•   Siding

•   Built-in lighting

•   Ceiling finish

•   Fireplace

•   Tiling

Similar to stick-built homes, modular homes have nearly endless customization options. From the style of the home to its size and layout, modular homes offer more flexibility for buyers.

Expense

The expense of a modular home vs. manufactured home can vary dramatically.

A modular home — also sometimes called a kit home — may cost less than a stick-built home, but it usually costs a lot more than a manufactured home.

Both modular and manufactured homes have a separate expense: land. In the case of manufactured homes, it may be possible to rent the land the home is delivered to, but owners of modular homes will need to buy the land they want to build on.

Another cost associated with modular homes is the foundation, which needs to be in place when the modules arrive. Manufactured homes affixed to a permanent foundation on land owned by the homeowner are considered real property, not personal property.

Here are some typical expenses associated with each home:

Another expense to keep in mind is financing. An existing modular home will qualify for a conventional mortgage or government-backed loan if the borrower meets minimum credit score, income, and down payment requirements.

Homebuyers building a new modular home often will need to obtain a construction loan.

Manufactured and mobile home financing is trickier. The key is whether the home is classified as real or personal property.

Manufactured homes classified as real property, including those used as accessory dwelling units that are at least 400 square feet, might qualify for a conventional or government-backed loan.

Financing options for mobile and manufactured homes classified as personal property include a chattel mortgage and an FHA Title I loan.

A personal loan is another option.

Recommended: Explore the Mortgage Help Center

The Takeaway

Mobile, manufactured, and modular homes have key differences. A manufactured home on leased land is not considered real property, while a modular home, always on its own foundation and land, is, and compares in most ways to a traditional stick-built home.

SoFi will finance a manufactured home if you qualify, refinance a construction-only loan to a traditional home mortgage loan or provide a mortgage for an existing modular home.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is a modular home better than a manufactured home?

In terms of appreciation and resale value, a modular home has the edge over most manufactured homes. And if a manufactured home is on leased land, the owner may face lot fees that keep rising.

What’s the price difference between mobile, manufactured, and modular homes?

Generally, mobile and manufactured homes are much less expensive than modular homes. A mobile home, by its very definition, was built before mid-1976. The size of the price gaps depend on how customized the home is, where it is, and how large it is.

Between manufactured and modular homes, which is fastest to build?

Unless there are factory or supply chain delays, manufactured homes are typically faster to build than modular homes. (Of note: A modular home can often be built much faster than a stick-built home.)

Photo credit: iStock/Marje

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q125-034

Recourse loans are secured loans in which the lender can seize a borrower’s collateral and, if necessary, other assets, should the borrower default on the loan. Common types of recourse debt are auto loans, credit cards and, in most states, home mortgages. Recourse loans are low risk to lenders so they tend to have lower interest rates than non-recourse loans.

Non-recourse loans are also secured by collateral but in this case, the lender can only seize the collateral pledged for the loan; they can’t take any other assets. Non-recourse loans are less common than recourse loans and tend to have higher interest rates due to their higher risk.

Read on to learn more about how non-recourse and recourse loans compare.

What Is a Recourse Loan?

A recourse loan is a secured loan for which the lender can seize more than just the collateral if the borrower defaults. The lender is also able to seize other assets the borrower didn’t use as collateral, including income and money in bank accounts.

How Recourse Loans Work

When a borrower defaults on a recourse debt, the lender can seize not only the loan’s collateral, but can also attempt to attach other assets to collect what’s owed. In essence, the lender has additional recourse to recoup their losses.

Between recourse vs. nonrecourse debt, recourse debt favors the lender while nonrecourse debt favors the borrower.

Examples of Recourse Loans

Hard money loans, which are typically based on the value of the collateral rather than just the creditworthiness of the borrower, tend to be recourse loans.

An auto loan is one example of a recourse loan. If an auto loan borrower defaults on the loan, the lender has the right to seize the vehicle and sell it to recoup its losses. If the vehicle has depreciated, however, and the sale doesn’t cover the loan balance, the lender can ask for a deficiency judgment for the difference. In that case, the borrower’s wages could be garnished or the lender could seize other assets.


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What Is a Non-Recourse Loan?

A nonrecourse loan is a secured loan for which the lender cannot seize assets that weren’t put up as collateral in the original loan agreement.

How Non-Recourse Loans Work

When a borrower pledges collateral on a secured loan, the lender can take that asset — but no others — if the borrower defaults on the loan. The lender will typically sell the asset to recoup their loss on the loan. The lender has no other recourse than seizing the collateralized asset, even if the sale of that asset doesn’t cover the balance of the loan.

Examples of Non-Recourse Loans

Lenders may be cautious about offering non-recourse loans because it limits their ability to recoup losses in the event of a default. Therefore, loans are typically classified as recourse loans.

Mortgages are classified as non-recourse debt as a matter of law in 12 states, meaning the lender cannot pursue a borrower’s other assets if they default and end up in foreclosure. The financial consequences would likely be limited to foreclosures of the home and damage to the borrower’s credit score.

A lender might be willing to offer a non-recourse loan to an applicant with excellent credit and steady, verifiable income if confident in their ability to repay the debt.

Recourse vs Non-Recourse Loans

Both recourse and non-recourse debt can be secured by collateral, which a lender can seize in the event of nonpayment.

The biggest difference between the two is that the lender is prevented from pursuing other assets owned by the borrower to repay what’s owed on a non-recourse debt. Basically, the lender has no other recourse for repayment of the debt other than the collateral that secures the loan.

Pros and Cons of Recourse vs Non-Recourse Debt

Depending on whose perspective the situation is being viewed from, recourse and non-recourse debt each has benefits and drawbacks.

Pros and Cons of Recourse Loans

Recourse debt is more favorable to the lender than the borrower because this type of debt gives the lender more avenues to collect when a debt goes unpaid.

Approval for recourse loans, on the other hand, may be easier since they pose less risk for lenders.

From the borrower’s perspective, here are some pros and cons of recourse loans:

Pros and Cons of Non-Recourse Loans

A non-recourse loan is more favorable to the borrower in the case of default. In that situation, the lender could only seize the asset put up as collateral, but couldn’t lay claim to any of the borrower’s other assets.

Non-recourse financing is usually riskier for the lender since they’re limited to collecting only the collateral when a borrower defaults. As such, lenders may charge higher interest rates for non-recourse loans and/or require borrowers to meet higher credit scores and income requirements to qualify.

From the borrower’s perspective, here are some pros and cons of non-recourse loans:

Managing Recourse vs Non-Recourse Loans

Generally, the only reason for a borrower to be concerned about whether they have recourse vs. non-recourse debt is if they’re in danger of default. As long as they’re keeping up with their payments, whether a debt is recourse or non-recourse shouldn’t be an issue.

But if there is a concern about potentially falling behind in paying a debt, then it helps to do some research before borrowing. For example, if trying to qualify for a home loan, asking upfront whether the loan is treated as recourse or non-recourse debt under a particular state’s laws will help in the decision making.

Making a larger down payment, for example, means less a borrower has to finance. Ultimately, though, a borrower should do what is right for their particular financial situation. It may be better for some borrowers to choose a home loan that allows for a lower down payment so they can keep more cash in the bank to cover financial emergencies down the line.

If you’re planning to apply for a car loan, you might consider buying a vehicle that tends to hold its value longer or making a larger down payment. Those could both help you avoid ending up underwater on the loan if you happen to default for any reason.

Credit cards are revolving debt, not a lump sum being borrowed, so the amount owed can change month to month as purchases are made and paid off. Some ways to manage this type of recourse debt include:

•   Keeping card balances low

•   Paying the balance in full each month, if possible

•   Setting up automatic payments or payment alerts as notification of when a due date is approaching

With any type of debt, recourse, or non-recourse, it’s important that you get in touch with your lender or creditor as soon as you think you’ll have trouble making payments. The lender may be able to offer options to help you manage payments temporarily. Depending on the type of debt, that may include:

•   Credit card hardship programs

•   Student loan forbearance or deferment

•   Mortgage forbearance

•   Skipping or deferring auto loan payments

Reaching out before a payment is missed can help you avoid loss of assets, as well as any negative impact on your credit.


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Is a Recourse or a Non-Recourse Loan Best for You?

It’s likely you won’t have much of a choice between a recourse and a Non-Recourse loan when looking at financing options. Lenders are likely to offer only recourse loans because they have more options to recover losses if the borrower defaults on the loan.

If you are presented with both options, choosing a recourse or Non-Recourse loan may depend on your financial situation.

•   A recourse loan may be a good option for those with a limited credit history because in exchange for additional avenues to recoup their losses, if necessary, a lender may offer low interest rates.

•   A non-recourse loan could be a good option for an applicant with good credit and steady income, as the lender may consider them a low-risk borrower and not feel the need to have additional assets to secure the loan.

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FAQ

What does recourse mean in lending?

Recourse refers to a lender’s options when recouping losses when a borrower defaults on a loan. With a recourse loan, lenders can recoup defaulted loan balances by seizing both the loan collateral and — when necessary — the borrower’s other assets.

Are you required to pay a non-recourse loan?

Yes, borrowers are required to make payments on both recourse and non-recourse loans.

Are non-recourse loans more expensive?

Non-recourse loans can have higher interest rates than recourse loans because lenders may perceive them as having higher risk.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL0124017

Buying an investment property while living in a rental, sometimes referred to as “rentvesting,” can be a compelling and financially sound plan. An investment property that you can rent to others offers clear advantages — it can generate cash flow, let you build equity, and benefit you and your family for years to come.

Investment property options may include a vacation home, a multi-family home, a single-family home, or a condo that you will rent to others. If you are informed and manage a rental property wisely, it may produce a strong enough income for the unit to pay for itself.

But you need to contemplate a few disadvantages of this concept to successfully make the dream come true. Here, learn what needs to happen if you’re planning to buy an investment property while continuing to live in a rental.

What Is Rentvesting?

The idea is about buying an investment property to rent to tenants while you continue to rent where you are (or, say, live with a significant other, or with your family). The rental income you earn can help you to pay your own rent, but it will also be necessary to cover the costs of owning your property.

Why Do It?

When you own a property, you have potential to achieve capital growth — your investment can increase in value as time passes. Maybe you’re not ready to settle down just yet. Or perhaps you don’t have the money to buy where you want to be. Rentvesting might be a way for you to grow your capital, anyway.

Buying an Investment Property

Purchasing an investment or rental property can be similar to buying a regular home. When you’re looking at buying an investment property that you don’t plan to live in, however, you will have to make some special considerations.

If you’ve decided to purchase an investment property and keep living in your current rental, that plan will affect what types of properties you look at, how you will finance the purchase property, and how much down payment you’ll need.

Here’s a quick summary of the difference between owner-occupied and non-owner-occupied rental properties.

Keep in mind, if you buy a house with two to four units, live in one yourself, and rent the others, you may be able to finance the purchase as an owner-occupied property. You’ll qualify for reduced interest rates, lower down payment options, and more favorable loan options.

But you must live on the property and qualify as a first-time homebuyer. Financing a property with an owner-occupied loan without living on the property as this is considered a type of mortgage fraud.

How to Pull Off the Buy

Step 1: Get Preapproved for a Loan

Before you shop, make sure a lender is willing to give you a mortgage. Qualifying as a first-time buyer has positives. You may have a better debt-to-income ratio, as mentioned above. However, you may have a shorter credit history or a smaller down payment to work with. Whatever the case, it’s helpful to get some numbers from your lender to assist with your investment.

Typical requirements for a rental property mortgage:

•   Credit score minimum of 620. Borrowers with scores of 740 and higher tend to receive better rates and terms.

•   Down payment: Borrowers for investment real estate generally have to put down 15-25%.

•   Debt-to-income ratio (DTI): This is the percentage of a borrower’s monthly income that goes toward debt. A 43% DTI is typically the highest ratio a borrower can have to qualify for a mortgage. When buying an investment property, a lender will generally allow you to count up to 75% of your expected rental income toward monthly income in the ratio.

•   Savings: A borrower should have cash available to cover three to six months of mortgage payments, including principal, interest, taxes, and insurance.

Your lender will also take into account what programs you qualify for. Financing options for an investment property are wide, and underwriting standards can be stricter for rental property applicants.

Some may include:

•   FHA

•   VA

•   USDA

•   Conventional

•   Seller financing

Step 2: Find a Property that Meets Your Criteria

Now that you have your budget and parameters set, you’re ready to find a property. You may want to enlist the help of a real estate agent who can serve as your first-time homebuyer guide, especially since you want to buy an investment property right off the bat.

Your agent can help you write an offer while your lender may be able to help you apply for a mortgage online. You’re well on your way to buying a house to rent at this stage.

Step 3: Think About the Future

If you’re buying an investment property, it shouldn’t be with only a short-term plan. Consider how this property might fit into your life in the long run. If you plan to get married and/or have kids, for example, you may want to look for a property that will suit you later. If you think other family members may need to move in with you down the road, room for them might be one of your criteria.

Step 4: Consider the Costs

Buying an investment property probably means carrying a mortgage, paying interest, and covering utilities and maintenance on the property. Home insurance is necessary and different plans apply depending on the property, so make sure you get covered. As an investor, you must also consider potential property management fees, periods of vacancy, and possible tax implications. Make certain you can afford these costs and still pay your own rent.

Step 5: Start Your Rental Business

Be sure to check local ordinances and business requirements for becoming a landlord. If you’ve got a plan and do your research, you may achieve success. Just don’t believe what you may see on TV, which makes owning a rental property look easy. Landlording is a tough job, and there’s a lot you need to know about the business before you start. Buying a house while renting is an endeavor that takes time and effort.

What to Know As a New Landlord

•   Housing laws can make or break you. Are short-term rentals allowed (if that’s what you’re planning)? What rights does your tenant have? If you need to evict a tenant, what does the process look like? Will you benefit by putting your property in an LLC? Always research and understand local housing laws.

There’s a lot to navigate, and you may want to consider hiring a property management company that specializes in this.

•   Determine how much to charge for rent. You’ll want to look at what other properties in the area are charging for rent and position yourself competitively. Also, consider what other landlords are allowing and charging when it comes to pets.

•   Prescreening is key. The reliability of your tenant is so important. It’s incredibly stressful when you’re not paid rent. Don’t rent to someone who “feels” like they would be a good tenant. Do your due diligence. Check credit and their background, and call references.

•   Create a plan for home maintenance, repairs, and other issues. If you’re hiring a property management company, plan for the expense. If you’re doing it yourself, make a list of contacts to call for the different issues that come up (electrical, plumbing, locks, handyman, etc).

•   Have procedures in place for unit turnover. It’s an incredibly intense time when a tenant leaves and another needs to move in. How are you going to handle inspections? Cleaning? Deposits? You will need a system for logging such events and being prepared for changing tenants.

Recommended: Fixed-Rate vs. Adjustable-Rate Mortgages

The Takeaway

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much profit should you make on a rental property?

There’s no easy answer for how much profit you should make on a rental property. Some investors buy property for the appreciation alone. There are also a number of methods for determining how much profit investors want to make on an investment property, such as cash flow, the 1% rule, gross rent multiplier, cash on cash return, cap rate, or internal rate of return. Those can help provide guidelines.

Is it better to buy an investment property and live in it?

Possibly. If you live in your investment property, you can qualify for owner-occupied financing, which means lower down payments and better interest rates. But it also depends on your plans. If you want to renovate an investment property, living in it during renovations could be challenging.

Is rental property a good investment in 2025?

Rental demand is strong in 2025, but buying property is more dependent on your individual situation rather than market conditions.

Photo credit: iStock/luismmolina

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Borrowing against home equity can put cash in your hands when needed. But how soon can you pull equity out of your home after purchasing it?

You might be surprised to learn that there’s no minimum waiting period to access your home equity. You’ll need to meet a lender’s other conditions and requirements to qualify for a loan against your equity, but you can decide when it makes sense to borrow against your home.

What Is Home Equity?

How is home equity explained? Equity is the difference between your home’s value and the remaining amount due on the mortgage. In simpler terms, equity represents the portion of the home that you own.

Home equity accumulates as your mortgage balance goes down and your property’s value goes up. As of March 2024, the average equity value among 48 million U.S. homeowners with mortgages was $206,000, according to the ICE Mortgage Monitor.

It’s possible to have negative equity in a home. That scenario can occur when you owe more on the mortgage than the home is worth. This is also referred to as being upside down or underwater on the mortgage. That’s important to know if you’re calculating how home equity counts in your net worth.

Ways to Access Home Equity

There are several options for borrowing against your equity. The most common are a home equity, a home equity line of credit, and a cash-out refinance.

Home Equity Loan

A home equity loan allows you to withdraw your equity in a lump sum. Home equity loans typically have fixed interest rates and your repayment term may last up to 30 years. A home equity loan is a type of second mortgage that doesn’t affect the terms of the loan you took out to purchase the property. Your home serves as collateral for the loan. If you default on the payments, the lender could initiate a foreclosure proceeding against you.

Home equity loans offer flexibility since you use the money any way you like. Some of the most common uses for home equity loans include:

•   Home repairs and maintenance

•   Home improvements

•   Debt consolidation

•   Medical bills

•   Large purchases

Interest on a home equity loan may be tax-deductible if the proceeds are used to “buy, build, or substantially improve the residence,” according to IRS tax rules. This rule applies through the end of 2025.

Home Equity Line of Credit

A home equity line of credit (HELOC) is a revolving line of credit that you can draw against as needed. HELOCs tend to have variable interest rates, though some lenders offer a fixed-rate option.4 When you take out a HELOC, you have a draw period in which you can access your line of credit and a repayment period when you pay it back. You pay interest only on the portion of your credit line that you use.

HELOCs can be used for the same purposes as a home equity loan. A HELOC may offer a lower interest rate than a home equity loan, depending on the overall rate environment. However, your payment isn’t always predictable if you have a variable interest rate.

Cash-Out Refinance

Cash-out refinancing replaces your existing mortgage loan with a new one while allowing you to withdraw some of your equity in cash at closing. A cash-out refinance loan isn’t a second mortgage; it takes the place of your original purchase loan. The balance due is higher to account for the amount of equity you withdraw in cash.

A cash-out refinance loan may have a fixed rate or an adjustable rate. Fixed-rate loans typically have repayment terms extending from 10 to 30 years. If you choose an adjustable-rate mortgage (ARM), you might be able to select a 3/1, 5/1, 7/1, or 10/1 ARM.

The first number represents how long you have to enjoy a fixed rate on the loan; the second number is how often the rate adjusts on an annual basis. So, a 10/1 ARM would have a fixed rate for the first 10 years. Then the rate would either increase or decrease once a year annually for the remainder of the loan term.

Requirements to Tap Home Equity

Qualification requirements for a home equity loan, HELOC, or cash-out refinance loan vary by lender. In most instances, you’ll need to have:

•   A credit score of 660 or better

•   At least 20% equity, though some lenders may go as low as 15%

•   A debt-to-income (DTI) ratio below 43%

Essentially, lenders want to make sure that you have sufficient income to make the payments on a home equity loan and that you’re likely to pay on time.

Lenders use your combined loan-to-value (CLTV) ratio to measure your equity. Your loan-to-value (LTV) ratio measures your home’s mortgage value against the property’s appraised value. The current loan balance divided by the appraised value equals your LTV.8 Combined LTV uses the balance of all loans, including first and second mortgages, to measure equity. This number can tell you how much of your equity you can borrow. Most lenders look for a CLTV in the 80% to 85% range, though it’s possible to find lenders that allow 100% financing.

Recommended: Understanding Mortgage Basics

Factors That Impact Timing

How soon can you get a home equity loan? Technically, right away. But the more important question to ask is whether it makes sense to access your equity sooner or later.

If you’ve just purchased a home, you may not have much equity built up yet. You may need to wait a few months for some equity to build up before borrowing against it. Your choice of lender could also make a difference. If a lender requires a home equity waiting period, you might have to wait until it ends to borrow.

Here are some questions to ask when deciding if the time is right to withdraw equity:

•   What will you use the money for?

•   How much do you need to borrow?

•   Which borrowing option makes the most sense?

•   How much can you afford in additional monthly mortgage payments?

Risks of Borrowing Too Soon

Just because you can get a home equity loan or HELOC right away doesn’t mean you should. There are some risk factors to consider if you’re thinking about an equity withdrawal.

•   Having less equity in the home can mean a higher LTV, which could make it harder to qualify.

•   Should your home’s value drop after borrowing, you could end up underwater on the mortgage.

•   If you only recently bought the home, you may not have a firm idea of your maintenance and utility costs, which could make it difficult to estimate how much you can afford in additional mortgage payments.

•   Your credit score may need time to recover so you can qualify for the best rates if you just signed off on a purchase mortgage loan.

Using a home equity loan or HELOC calculator can help you estimate what your payments might be. You can then add that to your existing mortgage payment to get an idea of what you’ll pay overall and what’s affordable for your budget.

Alternative Options

If you need to borrow money for home repairs, home improvements, or any other purpose, your equity isn’t the only option. You might consider these alternatives instead.

•   Personal loan. A personal loan allows you to borrow a lump sum and repay it with interest over time. Personal loans are typically unsecured, meaning you don’t need collateral and your home isn’t at risk if you’re unable to pay for any reason.

•   Credit card. Credit cards can be a convenient way to pay for large purchases, home improvements, or emergency expenses. Choosing a card with a 0% introductory APR on purchases can give you time to pay them off interest-free.

•   401(k) loan. If you have a retirement plan at work, you might be able to borrow against it. However, that’s usually not ideal since any money you take out won’t benefit from compounding interest, which could shortchange your retirement.

•   Home equity conversion mortgage (HECM). Eligible seniors 62 and older can get a home equity conversion mortgage to withdraw equity. You can also use an HECM for purchase loan to buy a home. A home equity conversion mortgage requires no payments as long as the homeowner lives in the property, with the balance due when they sell the home or die. Compare an HECM vs. reverse mortgage to see if you’re eligible.

You might also ask friends and family for a loan or sell things you don’t need to raise funds. Taking on a side hustle or part-time job could also bring in extra income so you don’t need to borrow.

Recommended: Reverse Mortgage Interest Rates

The Takeaway

Withdrawing equity from your home can give you access to cash when you need it. In addition to getting the timing right, it’s also important to shop around and find your ideal lender. Comparing rates, terms, credit score requirements, and CLTV requirements can help you find the best loan for your needs.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

How long after purchasing a home can you pull out equity?

There’s generally no set period for how soon you can take equity out of your home after purchasing it. Your ability to borrow can depend on your credit scores, debt-to-income ratio, and how much equity you’ve accumulated in the home.

Are there fees to tap home equity?

Home equity loans, HELOCs, and cash-out refinance loans can all have closing costs just like a purchase loan. Some of the fees you’ll pay can include appraisal fees, inspection fees if an inspection is required, attorney’s fees, and recording fees. You’ll need to pay certain fees out of pocket but your lender may allow you to roll other closing costs into the loan.

How fast can I get a home equity loan?

It’s possible to get a home equity loan as soon as you purchase your home. You’ll need to meet a lender’s minimum requirements to qualify for home equity financing. Getting approved may be challenging if you have a low credit score or only a small amount of equity in the home.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

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Real estate crowdfunding allows investors to pool funds together to invest in property. Crowdfunding has become a popular way to invest in real estate, and gain exposure to an alternative asset class without owning property directly.

Adding real estate to a portfolio can increase diversification while creating a potential buffer against inflation. Real estate crowdfunding platforms make it possible to invest in commercial and residential properties online, with potentially low barriers to entry. But accredited and nonaccredited investors (retail investors) are subject to different rules.

How Real Estate Crowdfunding Works

Real estate crowdfunding platforms seek out investment opportunities and vet them before making them available to investors. The platform then enables multiple investors to fund property investments at lower amounts than the actual property would cost. The minimum investment varies by platform, and might range from a few hundred dollars to upwards of $5,000.

Real estate investors then gain a proportional share of the profits. Depending on the nature of the investment, investors may see interest payments, rental income, or dividends. If a property is sold or assets are otherwise liquidated, investors could also see a profit.

Regulation crowdfunding makes real estate crowdfunding possible, as entities can raise capital from investors without registering with the SEC, as long as they offer or sell less than $5 million in securities.

Real Estate Crowdfunding Examples

Investors can join a real estate crowdfunding marketplace and browse investment options, which may include:

•   Individual residential properties

•   Retail space

•   Office buildings

•   Warehouses and storage facilities

•   Multifamily housing

•   Real estate investment trusts (REITs)

•   Real estate funds

Rather than concentrating capital in a single piece of property, real estate crowdfunding allows investors to distribute their capital among different types of properties. If you’re interested in how to invest in real estate in a hands-off way, crowdfunding can help you do it.

Crowdfunding Explained

What is crowdfunding? In simple terms, it’s the act of raising money from a crowd or pool of investors.

Crowdfunding is possible through Title III of the 2012 Jumpstart Our Business Startups (JOBS) Act. The Act’s purpose was to make it easier for small businesses to raise funds following the fallout of the 2008 financial crisis.

The Securities and Exchange Commission (SEC) subsequently adopted a series of rules allowing crowdfunding to be applied to real estate investments.1,2

Recommended: Alternative Investments: Definition, Example, Benefits, & Risks

Crowdfunded Real Estate for Accredited and Nonaccredited Investors

Today, accredited and nonaccredited (retail) investors can invest in crowdfunded real estate, but there are different rules for each.

Accredited Investors

An accredited investor, according to the SEC, is someone who:

•   Has a net worth exceeding $1 million, not including the value of their primary residence, OR

•   Had income exceeding $200,000 annually ($300,000 for married couples) in each of the two prior years and expects the same level of income going forward, OR

•   Holds a Series 7, Series 65, or Series 82 securities license

Investors who meet the qualifications to be accredited in the eyes of the SEC may invest any amount in crowdfunded real estate.

Nonaccredited Investors

Retail investors who don’t meet the criteria for accredited investors may be limited in how much they can invest in any Regulation Crowdfunding offering in any 12-month period. If either your income or net worth is less than $124,000, during any 12-month period you can invest up to $2,500, or 5% of your income or net worth, whichever is greater.

If both your income and net worth are $124,000 or higher, during any 12-month period you can invest up to 10% of your annual income or net worth, whichever is greater (not more than $124,000 total).

Advantages and Disadvantages of Real Estate Crowdfunding

Here’s a closer look at how the potential benefits and drawbacks of this alternative strategy compare.

Pros

Holding crowdfunded real estate in a portfolio can offer potential advantages:

•   Minimum investments may be as low as a few hundred dollars.

•   Crowdfunded property investments may yield above-average returns for investors who are comfortable with a longer holding period and highly illiquid assets.

•   Investors have flexibility in choosing which type of property investments they’d like to fund, based on their goals and risk tolerance.

•   Direct ownership isn’t required, which means there’s no need for investors to get a mortgage, come up with down payment funds, or deal with the headaches of managing a rental property.

•   Nonaccredited investors are not shut out of crowdfunding real estate, thanks to SEC rulemaking, but are subject to other restrictions.

Cons

While there are some attractive features associated with real estate crowdfunding, there are some things investors may want to be wary of:

•   Real estate crowdfunding platforms may charge hefty fees, which can detract from overall investment earnings.

•   Generally speaking, crowdfunded real estate is illiquid since you’re meant to leave your capital in the investment for the duration of the holding period.

•   Taxes on real estate gains can be complicated, as the dividend portion is typically taxed differently than profit from sales of properties. You may want to consult a professional.

•   Returns are not guaranteed, and properties may underperform as market or economic conditions change.

•   Nonaccredited investors are limited in how much they can invest in crowdfunded real estate by SEC regulations (see above).

Real Estate Crowdfunding Platforms

Online platforms allow investors to crowdfund real estate with a relatively low minimum investment amount. A typical minimum investment is $10,000 though some platforms allow investors to get started with $500 or less.

When comparing platforms that crowdfund real estate, it’s helpful to consider:

•   Minimum and maximum investment thresholds

•   Range of investment options

•   Investment holding periods

•   Fees

•   Investment performance

•   Vetting and due diligence

It’s also important to look at whether a platform works with accredited or nonaccredited investors. The best real estate crowdfunding platforms thoroughly vet properties before making them available to investors, have low minimum investment thresholds, and charge minimal fees.

How to Get Started

If you’re interested in real estate crowdfunding you’ll first need to decide how much money you’re comfortable investing. How much of your portfolio you should allocate to real estate investments can depend on:

•   Your age and time horizon for investing

•   Investment goals

•   Risk tolerance

•   Risk capacity, meaning how much risk you need to take to reach your goals

There’s no magic number to aim for. Some investors may be comfortable allocating a larger portion of their portfolio to alternative investments like real estate while others may prefer to limit their allocation to 5% or 10% instead.

Once you’ve got an amount in mind you can move on to researching real estate crowdfunding platforms. Remember to look at whether platforms work with nonaccredited investors if you don’t yet qualify for accredited status.

The Takeaway

Real estate crowdfunding offers an exciting opportunity to expand your portfolio beyond traditional stocks and bonds. You might consider this option alongside REITs, real estate funds, or real estate stocks if you’d like to reap some of the benefits of property investing without having to purchase a rental unit or a fix-and-flip home.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

FAQ

How would earnings from real estate crowdfunding be taxed?

Owing to the complexity of real estate-related tax rules, you may want to consult a professional. Crowdfunded real estate investments can produce income in the form of dividends or interest, both of which are taxable at the dividend rate. Generally, any profits you clear when exiting would be treated as capital gains, and the holding period determines whether the short- or long-term rate applies.

Would real estate crowdfunding be considered a high-risk investment?

Real estate crowdfunding is risky, as interest rate fluctuations or changing market and economic conditions can affect outcomes. If you’re weighing real estate vs. stocks, remember that the two have little correlation to one another. Holding real estate in a portfolio can help balance risk and provide some protection against market volatility.

What is the difference between an accredited and nonaccredited investor?

An accredited investor satisfies one of three requirements established by the SEC, based on net worth, income, or securities licenses they hold. A nonaccredited investor does not meet these requirements and is generally considered a retail investor. A nonaccredited investor is subject to limits on how they may invest in crowdfunding opportunities.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.