I have heard BP state recently no one is doing HELOCS on investment properties right now. If someone knows of a bank let us know.v
HI Amran,
Sounds like you are looking for a commercial line of credit, also known as a business line of credit. The lender will want to take a lien out on each of the properties you want to borrow against.
The big issue is whether you already have a mortgage out on the properties in your portfolio. These mortgages will be first lien and if you should default, are the ones that get paid first once all the foreclosed property has been dispositioned. Banks don't like being second lien because they have much higher risk.
If you have no mortgages, you can contact the commercial bankers at local banks and should be able to compare rates. They will be high right now, maybe 8% or more and variable.
If you have mortgages, your best bet is to ask for the commercial lender at the bank that has the mortgage. The bank is more willing to have second lien if they also have the first.
Current rate is 9.75%, interest only.
I have mortgages on all of them at three different banks. Some have a lot of equity and some very little so I was looking for a blanket line of credit that will take into consideration all of the properties combined.
which local bank are you using because all my investments are in Michigan right now and might be able to use the same institution.
Quote from @Amran Musaid:
I have mortgages on all of them at three different banks. Some have a lot of equity and some very little so I was looking for a blanket line of credit that will take into consideration all of the properties combined.
Hopefully someone else on this forum can advise you there. I don't have experience in doing that. My only advice would be to take out a line of credit with each bank. Sure, when you close on your next property, you'll be writing out three checks, one from each LOC, and you have 3x maintenance fees on the LOCs but still probably worth it. Other option would be to refinance with one bank, but that's crazy talk right now.
Quote from @Amran Musaid:
Is it possible to get one HELOC for my entire portfolio?
For the past decade plus, commercial banks operate on a principal called "relationship banking." The small commercial banks want your "good" business, and they prefer all of it; company cash (real estate operational) accounts, real estate trust accounts (tenant cash deposits), as well as your personal checking/saving and any other accounts you may carry. Then, yes, they will consider loans. How do I know this? Simple. I read the bank's 10-K filings for what they look for. An example from my bank's 10-K (bold emphasis is mine):
Deposits are the primary source of funds for our portfolio loans, loan pipeline and investments. Our deposit strategy is to obtain deposit funds from within our market areas through relationship banking. The majority of our deposits are from individuals and entities located in our primary markets of Johnston and Wake counties.
I happen to have RE in Wake and Johnston Counties. I maintained financially beneficial relations with them. They liked me and my company business. In my experience, if you want a "good" commercial loan today from a new lender, you should have prepared 18-24 months ago. Relationships generally take time. I agree with @Benjamin Aaker comment with a caveat: "Other option would be to refinance with one bank, but that's crazy talk right now." unless you have a "good" existing banking relationship. How do I know this? The concept is still the same as a decade+ ago. From the same bank, different year (2010), 10-K page 29:
Commercial real estate and real estate construction makes up the largest segment of our loan portfolio. This segment is closely monitored at the staff and Board level. Our Board of Directors receives reports on a monthly basis detailing trends. Underwriting criteria and procedures for commercial real estate loans generally include:
● Past experience of the investor in commercial real estate.
● Past experience of the customer with the bank.
To summarize: HELOC is the wrong term for what you want to do. A commercial LOC, maybe, but your scenario wouldn't fly at my commercial bank. I know of no bank that would do a second position NOO loan other than potentially the bank holds the first D-T and most likely the loan will require cross collateralization with other assets in a traunche or pool. Back in the day (e.g. my 12/21/2012 BiggerPockets post), I would present six or so low-cost properties per financing opportunity at market ~65%-75% LTV (less at acquisition) when I was building the portfolio. These conditions were negotiated by the bank on a customer-by-customer basis. All this is still possible with the right banking relationships in place. The details I posted back then are largely still true for all of my posts on that topic. Of course the numbers back then look obscenely low now. That's what a major correction does!
To me, you are a year late in making financial adjustments like a new portfolio-based pool. It's not that you can't do it now, but the terms and conditions may be less than desirable if available at all.
Quote from @Austin Fogt:
Yes, I have one. As described above a local bank(!) has all my firsts, and was willing to put a second on all of them to extend a line of credit. After a year I asked to bump it up to 80% LTV and they did it without hesitation.
Current rate is 9.75%, interest only.
Did your LLC or you own the properties? Is it a fixed rate? Thanks,
Quote from @Steven Goldman:I own them personally. The LOC is under the LLC.
Quote from @Austin Fogt:
Yes, I have one. As described above a local bank(!) has all my firsts, and was willing to put a second on all of them to extend a line of credit. After a year I asked to bump it up to 80% LTV and they did it without hesitation.
Current rate is 9.75%, interest only.Did your LLC or you own the properties? Is it a fixed rate? Thanks,
Adjustable rate interest only
Depending on the state, I can do a HELOC on an investment property as I work with lenders that do both HELOCs and fixed 2nd mortgages on investment properties. Right now, I'm doing those in CA and FL. Looking to expand into more states.
