Are there loan products for this situation?

Question

I bought a triplex in a great neighborhood in the northern part of Chicago suburb. The owner of the property i bought it from never updated the units. So they were quite outdated.

I bought the building and moved into one unit and did a total gut rehab. I used my own funds for the rehab. The unit is now done and it is now on the market for rent.

I have started work on unit 2 and 3. They are currently not occupied.

The building currently has a 30 year fixed conventional mortgage and a second position heloc.

Question: I would like to refinance or refresh the heloc. Are there any lenders out there that would lend(2nd position) on a building that is not fully occupied? Unit 1 will hopefully be rented this summer, but unit 2 and 3 will be vacant.

Eudith Vacio · Answer

Hey @James Fox

I used a credit union to obtain my HELOC & we can always go back and refinance the HELOC is we believe the property is worth more to tap into more equity. But is there a reason you don't tap into hard money or a construction loan? sounds like you have a lot more work that needs to be done...

Chris Seveney · Answer

Most conventional lenders will pass on this, but the bigger issue they are not addressing is the current CLTV. That number will drive everything.

A few things worth considering. If the rehab on unit 1 has added meaningful value, and units 2 and 3 are in progress, you may be sitting on more equity than the original purchase price reflects. A fresh appraisal could work in your favor here, particularly if comparable rents in that submarket support strong income projections.

On the lender side, portfolio lenders and community banks are your best bet. They underwrite the deal and the borrower, not just the occupancy ratio. Some will lend on a stabilized value basis rather than current income, especially if you can show a clear rehab timeline and demonstrate the asset quality of the neighborhood.

A DSCR lender is likely a non-starter since you live there.

If the HELOC refresh does not pencil out right now, another option is a short term bridge loan to carry you through the remaining rehab. It is more expensive in the short run, but it keeps the project moving.

Tanya Brewer · Answer

Broker here. Chris is right that DSCR is off the table since you're living in one of the units. On the HELOC side, most second position lenders on a 2-4 unit want to see the property stabilized. Two vacant units mid-rehab is a tough file for any standard HELOC product. They're underwriting occupancy, rental income, and CLTV on the as-is value, and right now the income side of this doesn't work for them.

Your best bet is a local bank or credit union near the property that does portfolio lending. They can look at the whole picture instead of checking boxes. Rehab timeline, comps in the neighborhood, projected rents, your credit and reserves. Ask for their portfolio or commercial lending desk specifically.

If you can swing it though, finishing units 2 and 3 and getting them leased up first puts you in a way stronger position. Once everything is stabilized you can do a cash-out refi on the first mortgage at the new appraised value and roll the HELOC into it. That's a cleaner move than trying to patch together second position financing mid-rehab.

J Castro · Answer

Hey @James Fox, welcome to BP!Great work getting the value-add done and pushing the rehab forward—sounds like a solid execution strategy so far.

On your question: yes, there are lenders that will do a second-position HELOC on a 2–4 unit property, but the key variables will be occupancy, CLTV, and lender type.

Most traditional banks get cautious when you have:

• Multiple vacant units
• A recent rehab / construction phase still in progress
• Existing first mortgage + HELOC already in place

That said, it’s not a dead end.

What typically works in situations like yours:

• Credit unions / local portfolio lenders (most flexible on structure)
• Private banking / asset-based lenders (more focused on equity than occupancy)
• Bridge + HELOC hybrid structures in some cases while stabilization is in progress

One thing to keep in mind: most lenders will want to see either market rent support from appraisal or signed leases in place, especially since you’re mid-renovation on the remaining units.

Aaron Zimmerman · Answer

You might br able to get a private money loan. How much are you looking for?

Matthew Bernal · Answer

Hi,  this is a solid move taking on a full gut and house-hacking the first unit. That’s how you force appreciation in these older triplexes.

On your question — yes, there are lenders that will look at a 2nd position or restructure the HELOC even with units vacant, but it usually won’t be a traditional bank product. This typically falls into bridge or DSCR transition territory, especially since you're mid-rehab and not fully stabilized yet.

A lot will come down to how close units 2 & 3 are to being rent-ready and what the projected rents look like once everything’s stabilized.

If you want, I can share a few options I’ve seen work in similar scenarios.
Quick question — how far along are units 2 and 3, and do you have target rents in mind yet?Check your DM!

Are there loan products for this situation?

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