@Jessica Piff You can get a line of credit on rental property in the form of a second lien deed of trust (at least thats what they are called in Texas). Everyone on BP throws out the term HELOC but it is a specific credit line based on a personal home usually for making improvements or putting in a pool. A bank can give you a line of credit based on any form of collateral they deem worthy. I could go out and get a line of credit on a fleet of 747s and people on BP would call it a HELOC. It may be difficult to finance something like that but I'm sure its doable. Just gotta find the right bank and terms.
Hey @Jessica Piff, It is very common to purchase a property with cash (to beat out other offers, get a better price, etc) and get a loan on the property afterward. HELOCs are usually with an owner-occupied property so you will probably be looking to refinance it instead. Check with a few lenders to make sure everything will work out the way you are planning so you aren't stuck halfway through your process.
@Jessica Piff You could but it kind of defeats the purpose because now you are paying interest on your equity when you use the LOC. Probably jut a cash out refi would work for what you're thinking but yes you could do it just remember you will pay closing costs twice so unless you're paying cash for a specific reason, its usually cheaper to just get financing up front. Then wait a few years for appreciation and then try to get a line of credit
Thanks for your responses! I am paying cash because the home is only 35K. I thought that I have heard you can HELOC an investment property, but perhaps I misread that.
Would I be able to refinance a 35K house? I'll be reaching out to smaller local banks this week to see what our options will be.
@Jessica Piff You can get a line of credit on rental property in the form of a second lien deed of trust (at least thats what they are called in Texas). Everyone on BP throws out the term HELOC but it is a specific credit line based on a personal home usually for making improvements or putting in a pool. A bank can give you a line of credit based on any form of collateral they deem worthy. I could go out and get a line of credit on a fleet of 747s and people on BP would call it a HELOC. It may be difficult to finance something like that but I'm sure its doable. Just gotta find the right bank and terms.
@Jessica Piff For an investment property you likely need 20% down so that makes your loan very small for a bank.Small loans banks need to hold in house they can't sell. There are some people who have mentioned investment HELCO like products I don't know of anyone who does them, maybe a private lender. Is this a value add where you would rehab and the house is worth more?
I will not be rehabbing this home. It's a fully rented property with long term tenants in there. I won't have a loan on it as I'm buying it outright for 35K.
@Jessica Piff to phrase it differently your max loan regardless of form is likely $28,000.00 so it would need to be an inhouse loan for a bank. They usually sell loans and they wouldn't be able to sell yours so a credit union or local bank may entertain a refinance but do your research.
Thank you, 28K would suffice for us. I am contacting local banks about in house loans this week. We just want to scale quickly and believe this strategy could work for us. I've seen/heard it done by others so we just need to find a lender who we can build a relationship with and do this ourselves!