Investment HELOC vs Refi vs Commercial Loans

8 Replies

Seems to be a consistent issue/question on BP attempting to drawing equity out of our investment properties. We are accustomed to HELOCs and REFIs with our own homes and naturally assume we can do the same with any SFR being operated as a rental.

  1. definition of assume:- it makes an A** out of you and me.

Assumption a deadly for investors; the mantra must be verify, get a second opinion and reverify.

Both HELOCs and REFIs apply only to SFRs which are owner occupied. Your rental is not OO and therefore will never qualify. It's a rental (aka business) property and you will need a commercial loan (just like MFU 5+ properties). Save your time and effort and seek another solution.

Cash out on a rental (sfr / mfu) will need to be on a Commercial Loan basis.

The loan rate contributes very little to the mortgage payments (run different rates thru a payment calculator to see the differences), so don't go crazy on the rate.

However, all commercial loans are ARMs and get reevaluated periodically, and that may be a deal breaker. My MFU arm changes twice a year, but not by big numbers, ( never seen a $10 change yet).

Hey NA Beard, I agree with your point about verifying information before taking action.  Especially when it comes to the lending aspect of the business because different banks are going to have different rules and in many cases an investor's exit strategy may depend on what type of loan they can (or cannot) get.

However, just so you (and others reading this) know, it IS possible to do both conventional cash-out refis (15 or 30 yr) and HELOCs on investment (non-owner occupied) properties.  I've personally done both and neither were commercial loans. 

Do most banks do them?  No.  But you just have to be diligent and keep calling until you find one that says "yes". 

I currently use commercial loans, but I want to understand conventional loans. What needs to be in place for me to get one? Can an LLC. Get a conventional loan? Do I need a super high paying w2 job to get one?

I hope @Jeff B. doesn't mind me asking more questions on his post...

@Aaron Vergason Good morning! @Graham Parham provided the following link to his company's website. A free downloadable eBook is offered on conventional lending. Within those 76 pages, much information is given on conventional loans, and the application process including loan underwriting. I don't know if his company write loans in your state. However, the eBook may be a resource as you seek knowledge in this area. I hope this information is beneficial.