Home equity line of credit for property bought with cash?

2 Replies

Hey there BP Fam, Quick 2 part question I’m looking to buy a property for about $25k that needs $10k for renovations (conservatively) and has an ARV of about $60k. Looking to BRRRR this one, which is my second rental purchase. 1) if I buy the house cash is there a way to get a Home equity line of credit - without having a lender? 2) What options are there to receive funding for the sale and renovation costs of a property, when the property is sale value is under $30k? Thanks for he support and BE GREAT! Christopher

@Christopher Oyenuga , If you're sure of your ARV and you didn't buy this property from the MLS, it shouldn't be too difficult to acquire either a refi loan or a HELOC. If you purchased it on the MLS, you may want to wait to allow the property some time before taking it to a lender to get your full value. In my experience, the bank will send out an appraiser who may value your property at or near your purchase price. While this is not always the case, especially when buying it foreclosed, but it sometimes happens. If it does happen, you will have to fight to prove that the appraiser did not value the property correctly.

To answer your first question, if you get a HELOC you most definitely will have a lender. To answer your second question, you can either get a refinance loan or a HELOC, and you're probably looking anywhere from 70-80% LTV. I would recommend speaking with different banks to see what they would require from you to pull your money out of the property, and what's the best deal you can get (with the most favorable terms). Good luck, and I hope this helps.

The small loan balance will be problematic for many lenders.  I’d start calling ASAP as many small local lenders, community banks, credit unions and the like.  

I'm wondering what you are thinking with the comment "way to get a HELOC without having a lender?" This doesn't make sense to me. Do you mean conventional (Fannie/Freddie) lender? You could borrow from a family member, or a credit card, and it wouldn't necessarily show up as a lien against the property.

Once you have renovated, you could pursue a conventional loan.  This will require a credit pull (good credit), required inspections (termite, perhaps wood destroying organism, perhaps wind mitigation), and most importantly a good insurance policy (those inspections must pass, and all safety issues corrected...no holes in walls or floors, siding on, good roof, passable electric system...no Federal Pacific panels).