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Many lucky houseowners are using equity they gained during the recent bull market in real estate to purchase second houses. Leveraging one real estate in order to acquire another can be a solid investment strategy, as you increase your investment portfolio one step at a time, and one house at a time, by using each new asset to help pay for another one.

Banks will normally scrutinize credit reports and income documentation more stringently when you borrow to purchase a second house, because they want to make sure that both of your mortgage obligations can be paid each month without a problem. And they may require larger down payments and charge slightly higher cash advance fees or interest rates than they did when you bought your first house. Nevertheless, many houseowners find it easy to qualify for new cash advances, and this is especially true for those who maintain excellent credit ratings. With the potential to profit from your purchase through equity appreciation, the repayment of a second mortgage is often easier than it was for a first mortgage.

For those who plan to use the second house as an income-producing real estate, there are also available tax deductions. As a landlord, you can usually deduct such things as repairs, utilities, and even routine trips you take to visit your real estate and check on its upkeep. Many investors combine their use of the second house, so that it is rented or leased sometimes, and at other times it is used as a personal holiday house. When you aren’t making cash by leasing it to others, you save cash by not having to pay for hotel lodging at holiday time. A qualified tax planner can help you find all of the various tax advantages to spending your holidays in your own second house.

When applying to secure a cash advance for an income producing second house, it is a good idea to present your lender with a thorough business plan and any documentation that illustrates the practical income potential of the real estate. If the previous owner made a profit each year by renting it out as a holiday retreat in the summertime, your lender will be more inclined to have confidence in your own ability to manage the real estate for extra income. One good way to show income potential is to hire a professional appraiser, who can do a market analysis of your real estate by comparing it to similar income-producing properties in the same area.

Another popular way to finance a second house purchase is by using an equity line of credit based on the value of one’s first house. Banks typically charge more interest for these cash advances, but you are able to avoid many of the closing costs that are associated with originating a separate mortgage. And regardless of whether you apply for a mortgage or an equity cash advance, you may be eligible for tax deductions of interest payments and other related expenses.