equity line of credit on property without income?

Question

A family member owns free and clear a commercial property that other family uses so he does not generate any income (property was inherited).  Can he take an equity line of credit out against it?

Simon W. · Answer

Jon W. it's definitely going to be hard, but it never hurts to talk to the bank directly "face-to-face" if a layout of what the income will be producing from the other property the bank might be okay with it. I mean the bank wants to make money, so give it a try.

Jon W. · Answer

Ned and Jon, thanks for the input.  He wanted to pull some money out to invest in another property.  As it is, he is just holding it and wanted to try to make it work for him.  The income from the new property would service the ELOC.  I will have him look into it.  Thanks for your help.

Jon Klaus · Answer

I agree with Ned.  I don't see a bank doing this without income to service the debt.  A hard money lender may do it.  How does he intend to service the debt?

Ned Carey · Answer

That will be a question for the commercial dept of a bank. My experience is banks tend to like Owner occupied commercial properties right now.

Underwriting for Commercial lending tends to vary more than homeowner mortgages so this may vary by lender. My gut tells me a lender would prefer a refinance  vs an equity line but I don't know.

The property doesn't have to generate income if the business using it generates income.  The bank will want to see income from somewhere.

God luck - Ned

Jon W. · Answer

I should add that my first thought was that he could not get an ELOC on a commercial property with no income since commercial properties are appraised based on their income.  However, this property has great potential income as it is located in the heart of downtown Williamston, MI right on the strip.  Does anyone have any thoughts?  Much appreciated.