HELOC on Investment Properties?

[Tom Thomson]

I have several single family home properties with over $100,000 equity in them and wondering if there is a way to tap the equity on those. Not looking to refinance due to the great interest rates 4% on 30 year loans but would have not talked to any lenders that will do HELOC's yet. Are there any?

[Devin Peterson]

Quote from @Tom Thomson:

I have several single family home properties with over $100,000 equity in them and wondering if there is a way to tap the equity on those. Not looking to refinance due to the great interest rates 4% on 30 year loans but would have not talked to any lenders that will do HELOC's yet. Are there any?

 There are HELOCS for investment properties but there are some caveats.

- Most likely will NOT be a DSCR underwrite. Meaning, DTI, and taxable income are in play and can limit your HELOC amount also impacting the amount to qualify for and or making it extremely difficult to qualify for anything at all.

- Vacancy rate factor and bottom line Schedule E income will be used to calculate the rental, no the gross DSCR lease amount. If you haven't filed your taxes strategically over the past 2 years and are showing a loss, it's probably not going to work out.

- Higher rates. IF you surpass the first two hurdles, you're then facing starting HELOC rates that are easily 12%+ Higher than what a traditional DSCR cash out would run you.

- HELOAN option - There is a small chance that you can pull out the equity using a DSCR HELOAN but make sure to calculate the blended rate and total payment before moving forward and comparing that to a full new 30-year fixed loan. Side note, you can also use the interest-only option to squeeze as much cash flow as possible with higher rates and expenses in this environment.

Good luck!