HELOCS on Single Family Investment properties

[Alfredo Cardenas]

Hello,

Need some advice. ...I have 3 rental single family homes. Two in Florida and one in Texas. All of them have a mortgage and one of them has a HELOC on top of the mortgage. All of them have plenty of Equity (even the one with the existing HELOC). My needs: I need cash to open a business (which I have over 25 years of experience on). My hesitation: All of the homes are under 4% interest rate (the biggest one is at 2.8%). Question: Is there such a thing or product as a HELOC on investment homes in FL & TX? Why a HELOC instead of refinance you may asked? For once, i may not need all the money but I sure need to have it immediately available just in case I need it. I don't want to pay a fixed high monthly payment when i may not need all the money at once. Issues: My only income right now, as I am getting close to open the business, is my rental income which is very good for just 3 homes. My credit score is over 700 (not sure by how much is over 700). Any ideas of what my options are or what products are out there to fit my situation? Again, I prefer a credit line type of product or HELOC. if someone suggest cash out refinance, I see cash out refinancing the same way as selling the home without the fees associated with selling. On top of that, the bigger home is at 2.8% rate right now.

[Lauren Robins]

Hi Alfredo! 

Your situation is very relatable for many investors who have locked in excellent mortgage rates on rental properties but now need liquidity for a new venture. Given that your properties have substantial equity, a Home Equity Line of Credit (HELOC) is indeed a strategy worth exploring—especially since you want flexible access to capital without disturbing your current low-interest first mortgages.

Traditionally, HELOCs are easier to obtain on primary residences, but they do exist for investment properties, including in Florida and Texas. However, they are more niche products, typically offered by portfolio lenders, local credit unions, community banks, and private lenders rather than the big-name national banks. Not all institutions offer HELOCs on non-owner-occupied properties, and those that do usually offer lower loan-to-value (LTV) limits—often in the 65–70% range. Expect interest rates to be higher than owner-occupied HELOCs, and underwriting will be stricter, especially given that your current income is from rental properties only.

Your decision to avoid a cash-out refinance is well-founded. Replacing a sub-4% mortgage—especially one as low as 2.8%—with a new loan at current rates (which are generally 6.5–7.5% or more for investment properties) would be a substantial financial hit, not just in monthly payments but in long-term cost. You’re also correct that a cash-out refi feels similar to selling part of your equity at today’s costlier rates, which is rarely appealing when your existing loans are this favorable.

Given your preference for a credit line structure, a HELOC is ideal because you only pay interest on what you draw, and you can reuse the credit line as needed. This flexibility is especially useful when launching a business where cash flow may be uneven in the early stages. You’ll want to shop around specifically for HELOCs for investment properties, and you may have better luck getting approved on the home that already has a HELOC, as the lender has already demonstrated comfort with a second lien position.

One challenge, however, is that your sole income from rentals might limit your borrowing power, especially with traditional banks. That said, your good credit score (700+) and strong equity can help you qualify with portfolio lenders or DSCR (Debt Service Coverage Ratio) lenders, who focus more on the cash flow of the property rather than your personal W2 income. These types of lenders are used to working with investors and may offer HELOCs or interest-only credit lines secured by investment properties.

You could also explore a Business Line of Credit or SBA Express Line once your business is formally established. If you're forming an LLC or S-Corp and can project reasonable income (especially with 25+ years of experience in the field), some banks may offer you a line of credit secured either by business assets or real estate. In some cases, you can even get a business-purpose HELOC backed by your investment property, which can keep it cleaner for tax purposes.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.