90% LTV HELOC on investment property

Realtor · Alexandria, VA · Member since 2021 · 12 posts · 10 votes

In the north east/mid east area. Looking to see if anyone has any good recommendations on lenders that will provide 90% LTV HELOC on an investment property. Also allowing that HELOC to be used for a dp on a STR.

Just got through the process with a lender and they miscalculated the HELOC amount due to the fact it was an investment property and not a primary residence.

thank you!

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Alex BreshearsBusiness Member

Lender · Springfield, MO · Member since 2020 · 354 posts · 504 votes

Hi Evan!

As others have mentioned the 90% CLTV on an investment property doesn't exist in this lending environment right now. But I also wanted to offer some insight into the thought process and why this may not be the best option.

First, being overleveraged in one property to then buy another property (and potentially keeping this train going with the same business plan) can be building a house of cards for real estate. This situation is what helped take down the 2008 housing market with not only over leveraged properties, but also loose relatively free monetary policy. I think using this as your primary source of capital for a new property can overall be problematic in the current environment, especially on an STR property.

When you borrow from one property to fuel another purchase, if that 2nd property falters, you are also covering the costs on the first property. You are creating a case where the first domino falls, it takes down the rest. STR's in particular are facing lending challenges because lenders are seeing the headwind in the economy with record high inflation, increasingly regulations around these properties, and saturation happening in several markets. STR income can be highly variable, so unless you have the reserves for carrying costs when occupancy dips, I wouldn't recommend this strategy right now, especially if you are looking at a property in a leisure travel market. Inflation eats away at discretionary income, and leisure travel is usually the first thing cut from the list of expenses.

Other options might be using the cash flow from property 1 to save up for property 2, or looking at other ways of acquiring real estate other than 1 person on title for 1 property. There are a whole ton of options out there so don't pigeon hole yourself into one way and not consider other possibilities.

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Slaiman Atayee
Real Estate Agent · Washington, D.C. · Member since 2018 · 70 posts · 27 votes
4y
A simple google search will do you wonders here - ""MY AREA" HELOC" and then drill down to the difference in LTV for an investment property. 90% is on the higher side for an investment property though. You can also search local credit unions as most of the good HELOC options come from them. I live in DC and have used Tower Federal Credit Union at 100% LTV on a primary as well as Navy Federal 95% on a primary (through a friend that works there) although TFCU is fairly slow and Navy Federal was expensive (+3% on the prime rate). Also see what your personal commerical bank (where your checking is) has to offer as it might suprise you. TD Bank has some options as well. Good luck!
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
4y
You might be able to do 85% with a conventional Investment property loan for a purchase, if it allows for it on your DTI. A HELOC on an investment property is not common.
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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Evan Staats 1) there are not many heloc lenders for rental property 2) the lenders that can - will not likely be able to go up to 90% combined loan to value ( cltv)
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Jonathan Taylor
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
4y
@Evan Staats Its highly unlikely to find 90% CLTV for an IP. I got a HELOC on my IP (CA only bank unfortunately) and they maxed at 60% CLTV on exception. That was after calling 12 CA and national banks and getting solid NOs. B of A and Chase paused HELOC products for primary residences this year, to provide context.

To address your DP question, my lenders do not have any issue using HELOC funds to purchase but step one will be a hurdle that many not be achievable.

Take @Slaiman Atayee 's advice and let us know what you find.
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Alex BreshearsBusiness Member
Lender · Springfield, MO · Member since 2020 · 354 posts · 504 votes
4y
Hi Evan!
As others have mentioned the 90% CLTV on an investment property doesn't exist in this lending environment right now. But I also wanted to offer some insight into the thought process and why this may not be the best option.
First, being overleveraged in one property to then buy another property (and potentially keeping this train going with the same business plan) can be building a house of cards for real estate. This situation is what helped take down the 2008 housing market with not only over leveraged properties, but also loose relatively free monetary policy. I think using this as your primary source of capital for a new property can overall be problematic in the current environment, especially on an STR property.
When you borrow from one property to fuel another purchase, if that 2nd property falters, you are also covering the costs on the first property. You are creating a case where the first domino falls, it takes down the rest. STR's in particular are facing lending challenges because lenders are seeing the headwind in the economy with record high inflation, increasingly regulations around these properties, and saturation happening in several markets. STR income can be highly variable, so unless you have the reserves for carrying costs when occupancy dips, I wouldn't recommend this strategy right now, especially if you are looking at a property in a leisure travel market. Inflation eats away at discretionary income, and leisure travel is usually the first thing cut from the list of expenses.
Other options might be using the cash flow from property 1 to save up for property 2, or looking at other ways of acquiring real estate other than 1 person on title for 1 property. There are a whole ton of options out there so don't pigeon hole yourself into one way and not consider other possibilities.
[email protected]Podcast Guest on Show #210
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Evan Staats
OP
Realtor · Alexandria, VA · Member since 2021 · 12 posts · 10 votes
4y
Thank you all for your information and replies! I did just what majority of you suggested and call a multitude of credit unions and found literally one out of 8 or 9 that offers HELOC on investment properties. Langley federal credit union will provide a HELOC at 70% CLTV. they are based in Virginia so I'm not exactly sure about out of state properties. Maybe works with VA,DC,MD. Again thank you all I appreciate your expertise!
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Daniel Bertozzi
Investor · Alexandria/Arlington/Northern Virginia · Member since 2020 · 15 posts · 9 votes
3y
Had a phone call with my lender from the ONE brokerage today and they have access to a product which allows you to "essentially" take a HELOC on an investment property. Its actually a second position/second mortgage, cash out refinance up to 85% LTV with rates in the ballpark of 11-14% (which is why they probably don't talk about it a ton). They also allow you amortize it up to the 30 year schedule. I believe they called this product a "Heloan" or something like that. Not that this is exactly the HELOC everyone was looking for but it does open up a product that doesn't seem to exist anywhere I've contacted. Would definitely contact them though for all the specifics if anyone is interested.
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