Atlanta, GA · Member since 2019 · 45 posts · 34 votes
I own two properties free and clear, with a total value of $750,000. I live in one and rent out the other. I've been turned down for a HELOC by three different lenders (Penfed, US Bank, and Wells Fargo) all because I have a very low debt-to-income ratio. I don't know what to do. I hate thinking about that equity just sitting there, plus I could use a little cash. I'm hesitant to sell the rental, as I use that as rental income. Any advice would be much appreciated.
Investor · Chicago, IL · Member since 2016 · 197 posts · 105 votes
6y
You ever consider doing a cash-out refi on one of them, preferably the one you receive income on since the rent can help pay for the debt service, depending on who you go through you can get anywhere from 70-80% of the value of the property. Also even though you can take out 70-80% you could also take out less if don't want to take out the max.
Rental Property Investor · Portland, ME · Member since 2019 · 160 posts · 231 votes
6y
@Lisa Sluss Hi Lisa, I’m 99%sure a lender would love to do a cash out refi on a free and clear rental property.
I used to work as a lender doing owner occupied CRE finance nationwide and this was our favorite thing to do. We would go up to 60% LTV cash out, granted this was CRE for small business.
Investor · South Pasadena, CA · Member since 2013 · 23 posts · 12 votes
6y
I kept hitting snags with getting a HELOC or regular loan in spite of excellent credit and savings because of debt to income (no W2 job), or the way property was held or described - so many little things you never think of! Right now I'm working with Cash Call. I heard so many ads and thought it sounded too good to be true or that the same issues would pop up, but they have a loan for investors that I just got prequalified for. You need 6 months investing experience and a deal where the rent payment is greater than the loan payment, and it can't be a major fixer. The interest will be higher than home mortgage rates but lower than hard money. They don't do commercial with this program so it won't work for 5 units or more, but you can get a 1-4 unit property. I haven't completed the process yet, but so far it seems to be going well. They also have no limit on how many properties/loans, as long as the rent covers the mortgage, so in theory you could get a bunch of deals done. I'll let you know if it all blows up in my face. ;)
I own two properties free and clear, with a total value of $750,000. I live in one and rent out the other. I've been turned down for a HELOC by three different lenders (Penfed, US Bank, and Wells Fargo) all because I have a very low debt-to-income ratio. I don't know what to do. I hate thinking about that equity just sitting there, plus I could use a little cash. I'm hesitant to sell the rental, as I use that as rental income. Any advice would be much appreciated.
O.k. Something's not quite right here. We may not have the whole picture.
Your personal residence and an income property are paid off. So, you've had good income and should still have income from the rental property. Is the rental in a business entity structure and you're not paying yourself enough? ... or is the cash flow from it that slim?
Getting an equity line on other than your primary residence can be challenging, especially in the current financial environment. Let gather the pieces and figure this out.
Investor · Dundee, OR · Member since 2016 · 104 posts · 162 votes
6y
You could be too leveraged, for any financial institution. All those hard inquiries (credit) could be effecting your credit score as well. Be careful, this is how people go broke. Might need to rethink your spending or get a second job for a while. Best of luck. Selling would be my last resort.
It really depends on your market. $750K could do a lot of damage in the rental market I'm in, so I look at that figure and see 3-4 rentals vs only 1 (assuming you don't sell your primary residence). If it were me personally, I'd rather buy 4 rentals in cash, collect 6K/mo in rent...and have $50K sitting in the bank to start off....not too bad if you ask me. But again, it all depends on where you want to park your capital.
Accountant · NC · Member since 2017 · 64 posts · 26 votes
6y
@Lisa Sluss you can cash-out refinance without a mortgage. My clients have done that numerous times. Do you have any community banks in your area? These banks are more relationship based and have offer flexibility in their underwriting. What state are you in?
Realtor · Austin, TX · Member since 2019 · 1 post · 0 votes
6y
@Lisa Sluss Have you considered a bank that doesn't conform strictly to fnma or fmcc? To my understanding, banks that only offer conforming loans won't allow over 4 mortgages at a given time. It's "too" risky, obviously they don't know investors, risk is the name of the game. Unfortunately, big name banks don't like risky investments. There are plenty of portfolio banks that would be happy to lend you money, especially since you seem like a seasoned investor. Best of luck, cheers!
I just got a HELOC on my primary last month. The house is not paid off but shopping around does pay off. I called every credit union in my state (about 10) to see who had the best deal. I ended up with a HELOC that I paid nothing for (no appraisal, no fees, not anything) at a rate of 1/2 point below prime. It pays to call around.
Investor · Saint Joseph, MO · Member since 2016 · 69 posts · 23 votes
6y
@Lisa Sluss I definitely think you should at least check into the cash out refi! Has worked well for us and you get to keep your properties. As long as they are cash flowing this could be a great option for you!
Rental Property Investor · Olympia, WA · Member since 2019 · 1 post · 0 votes
6y
@Lisa Sluss
Isn't that what the BRRRR method is all about? Refinance the rental home you own free and clear for 70-80% of its appraised value in order to Buy your next Rehab/Rent/Refi property. And Repeat.
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
You might try reaching out to various hard money lenders and give them your particular situation. You'll want to make sure upfront that they even do long-term mortgages and then go from there.
Rental Property Investor · FL · Member since 2020 · 2 posts · 0 votes
6y
@lisa I have a loan product that doesn't require any income verification so you won't have any debt-income ratio issues. This cashout refinance is available for your rental property. This is not a hard money loan so the rates are good in the 5%-6% range with a 14 day close. This is a good strategy because if you sell your property you may have to pay capital gains tax. I'm sure your accountant can verify that. Reach out and I can give you all the details. Jim
Boise, ID · Member since 2019 · 59 posts · 36 votes
6y
@Lisa Sluss just think of it like the brrrr strategy. You’re almost done. If that’s not what you want can you add value to the rental? Maybe some new amenity for the renter that you can charge for and add to your income?
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
6y
@Lisa Sluss reasonably others suggested a cash out refi on the rental with an asset based 30 yr rental lender, called, portfolio, soft money, some here called dscr based lenders.
One such lender is finance america, Lima one. Join your local REia, ask around other landlords for dscr lender referrals.
Terms today are excellent given they are not dti based.
Only leverage leaving 400-500 positive cash flow after debt service or 1.7 or better dscr. I'm very conservative re leverage.