HELOC on multiple properties?

27 Replies

Greetings all:

We own 3 rental properties in the Dallas area, paid for free and clear. They are held in an LLC. Total value of all three is about $150,000. I want to tap the equity in these properties to build a rental house on a vacant lot and/or do some low end property flips.

Does anyone have any advice, or know if it is even possible, to borrow against equity in three separate properties? Income/debt ratio-wise, we should qualify for the maximum 80% LTV and can personally guarantee the loan with credit scores in the mid-700s.

Should I expect to pay a higher rate than the mid-3s I am seeing for a single property HELOC?

Any advice on lenders and what kind of rate to expect would also be appreciated. 

Thanks,

Stan

Stan,

You're HELOC will be 3 separate HELOCs, one for each property. Therefore, there is no reason, as long as your debt to income ratio will support the leverage for each transaction, why you shouldn't be able to get a HELOC against all 3.

As for the interest rate... I can't begin to speak to the interest rate. There are too many factors at play and it's completely dependent on the lender. My personal recommendation, based upon my banking background not my REI experience, would be to work with a local portfolio lender. You're more likely to get the best possible rate, plus you may be less likely to get a higher rate for HELOCs 2 and 3 in this "big bang" approach. It's also a great way to start building what could turn into a very valuable relationship with a local lender. Just sayin'! :)

Get the HELOCs, do the deals successfully and service those HELOCs properly, there's a good chance you might not have to ever use a HELOC again. Local portfolio lenders, because they have their own underwriters - usually right down the hallway from the lender you now have a track record and relationship with - have a lot more latitude than the big banks/originators. They will lend based upon track records & relationships, because they have that flexibility.

Hattie

As far as i've seen rental HELOC's are rarely 80%. The places that still do these have pretty strict requirements, the one I know of offhand required property to be paid off and would only go to 60%.

Having the properties in an LLC will scare most of the big players away probably as well. You might be able to find a small CU or bank that will do what you're looking for but it's going to cost more then the things you see advertised.

Josh and Hattie probably know way more than I do but I was told no locally when asking for a heloc. I was told it was only possible to do a heloc on my residence. I will be very interested if you find someone that will offer this arrangement. Please keep us posted. SWBC in San Antonio will do a cash-out refi while you are still under 4 mtgs. This is the route I was considering to access some equity. Up to 75% of appraised value I believe. Let us know what you find. Good luck!

-Will

See if Wells Fargo will do these for you; I have a line of credit on an investment property that was obtained with Wachovia who is now Wells Fargo. 

Originally posted by @Will Pritchett:

Josh and Hattie probably know way more than I do but I was told no locally when asking for a heloc. I was told it was only possible to do a heloc on my residence. I will be very interested if you find someone that will offer this arrangement. Please keep us posted. SWBC in San Antonio will do a cash-out refi while you are still under 4 mtgs. This is the route I was considering to access some equity. Up to 75% of appraised value I believe. Let us know what you find. Good luck!

-Will

 I don't have any mortgages. I will give it a try and let you know what happens. 

Thanks to everyone else for the replies- some really good information!

Originally posted by @Joshua Springer:

As far as i've seen rental HELOC's are rarely 80%. The places that still do these have pretty strict requirements, the one I know of offhand required property to be paid off and would only go to 60%.

Having the properties in an LLC will scare most of the big players away probably as well. You might be able to find a small CU or bank that will do what you're looking for but it's going to cost more then the things you see advertised.

I had a feeling the mid-3s would end up being too good to be true. I am just hoping to end up better off than with a hard money lender.

Most banks would want the properties directly in your name for a HELOC or even conventional financing.

You might be better off to get 30 year fixed for these as the payments will be very low and you will still positive cash flow...hopefully.

Expect HELOC for an investment property in your name to be minimum 6%.

it tough to find someone to do a heloc on an investment property. The best I was able to find was a Washington cu who would go 70-75% ltv and he rate was higher than the owner occupied heloc of 3.25%. I know things are always changing for the better but its tough.

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I have one quick question and then a suggestion.
Question) Does it have to be a HELOC? What about just doing a refi on these 3 properties and pulling the money out?

Comment) If you want it to be a HELOC, one thing you might want to do is find a local bank that does portfolio loans and see if they'll do an LOC on the equity. They'll only likely go up to 70% LTV. And their rate will probably be in the 5 to 5.5% range.

But I think that would be one option that might allow you to do one LOC on the 3 properties.

My guess is they still might ask you to do a blanket loan on the 3 properties for say, 50% LTV so they could all be tied together and then do the LOC on the remaining 20% of the equity.

Again, I would just do a cash out refi and pull your money out and not bother with trying to do the LOC. I think that would be the easiest path to take. But if you do need it to be an LOC, I would try looking at local banks that do portfolio loans and possibly blanket loans. If they do, they might do an LOC on the 3 houses as a group.

But I will say that Texas seems to be one of the MOST investor friendly states in the country in terms of financing. So if there is one state out there that could let you do something like this, I think Texas is probably my first vote for being able to pull it off.

G/L

 @Derrick Craig:

 Thanks Derrick. It must be a Texas thing, I tried them and they can't do it. Apparently we have some unique regulations here, I have run into this on other issues like cash out refis when I sold loans a decade ago. Thanks for the help!

For anyone else that is interested, I called at least 5 banks in Texas, most of them local. None will do a LOC for investment properties held in an LLC. The best deal I found was a private lender at 2 points in, 1 point out, 10% and they want to handle escrows. He is willing to go to $115K on 3 properties with est. value of $150 - $160K.

It appears this is one of the pitfalls of a self-directed IRA in Texas.

@Stan Hill try RBFCU. They are in Austin and maybe San Antonio. They do 80% LTV on investment property and it doesn't have to be paid off. The rate is 2.75% variable. I'm considering doing one of these on a property I have in Austin.

Richelle

 @Richelle Thomas:

Thanks Richelle! I will give them a try. So far, the problem has been that these properties are owned by an LLC. But we shall see. I love that rate anyway. We do have our home paid off, value about $190K. That would put about $150K available, and most rates I've been seeing for HELOCs are in the mid-3s. Even if they don't do it on the investment property, I'll give them a holler if I can ever get the real boss (insert wicked grin here) to go along with tapping the home for investments. 

Oh and can anyone help with an easy item? I see the blue @name a lot. I have tried to do it, doing the quote then deleting everything but the blue thingies, but it doesn't work. I tried to do a search for it, but couldn't find anything. Any help would be appreciated. 

Oh and even though I can't figure out the blue thingy, I really am reasonably intelligent. Honest!  ;)

Originally posted by @Mike H.:

I have one quick question and then a suggestion.
Question) Does it have to be a HELOC? What about just doing a refi on these 3 properties and pulling the money out?

Comment) If you want it to be a HELOC, one thing you might want to do is find a local bank that does portfolio loans and see if they'll do an LOC on the equity. They'll only likely go up to 70% LTV. And their rate will probably be in the 5 to 5.5% range.

But I think that would be one option that might allow you to do one LOC on the 3 properties.

My guess is they still might ask you to do a blanket loan on the 3 properties for say, 50% LTV so they could all be tied together and then do the LOC on the remaining 20% of the equity.

Again, I would just do a cash out refi and pull your money out and not bother with trying to do the LOC. I think that would be the easiest path to take. But if you do need it to be an LOC, I would try looking at local banks that do portfolio loans and possibly blanket loans. If they do, they might do an LOC on the 3 houses as a group.

But I will say that Texas seems to be one of the MOST investor friendly states in the country in terms of financing. So if there is one state out there that could let you do something like this, I think Texas is probably my first vote for being able to pull it off.

G/L

 Thanks Mike! The properties are paid off. That's the really frustrating part. I have both knowingly and unknowingly put myself into this position. We considered financing the first two properties. With fees generally $2,000 or more (I want to say we got GFEs at around $2,500 in lender fees), it didn't make sense to us to pay what we perceived as an additional 4%+ for these properties. We paid $47.5K for two, and $44K for the other. As most fees are fixed, it just seemed to not make sense on such a small loan size.

And in reality, we're really talking a simple LOC as these are not owner-occupied. I have tried at least 4-5 local banks. Being owned by an LLC seems to be the catch-all.

Thanks for the insight. I am really impressed by the info I've been getting here from the various resources.

Stan, I think a lot of the issue you're seeing on a business LOC is coming from the source. You need to go to a credit union. We just started our company, Philanthropic Properties, LLC, and went to two credit unions, opened a business account, and in less than a week we had over $75k. From Amplify, we got a $50k Home Express Line of Credit, a specific program they have. From United Heritage Credit Union, we got a little over $25k as simply a business line of credit. University, A+, Velocity, RBFCU, the list goes on, you can get to each one and get anywhere from $10k to $50k on simply a signature.

Beyond that, with loans, there's a lender here in Austin, AMP, who focuses on investors.  There's also a product from Flagstar, and again the Austin guy knows how it works for us as investors, which is inclusive of rehab costs on a 15 year note.  I think it was 80% of purchase plus estimated rehab costs.

@Stan Hill  type the "@" symbol and begin the person's name and it should bring up a list of options. Then the person will be notified of their name being mentioned. 

Also, does anyone know if RBFCU does 30 yr. fixed in investment property?  Last I asked they only did 15yr. notes for rentals. 

Thanks,

Will

@Jon Klaus  

These properties are paid for in full. As cash out refis would probably be a good option, it's a bit frustrating to think I put myself at a disadvantage by paying cash. And actually, that is an area I have been reading about and learning here on BP and other sources. With the cost of money being relatively cheap, I will likely be better off doing the traditional 20-30% down on our next venture. 

@Stan Hill - I agree HELOC's can be different from each bank in the same state. I am trying to go through the same process in VA and Baltimore area and getting different answers from each bank. It ultimately depends on how soon are looking for the cash and what are you looking cash for.

I was looking for cash-out refinance. 

@Michael Johnson

Thank you Michael! I did talk to at least 4-5 local banks, but did not try a credit union. I will see if any even hint at being a little creative and give a few a shot.

@Nilesh Makhija

Nislesh I have definitely had questions asked that lead me to believe all of what you stated is true. I think that Texas may also have different regulations on banking. I was on the phone one bank in California- I think it was Union Bank. All was going well until I mentioned Texas.  

This can be done.  I always recommend people call up the smaller, local banks in your area.  I am doing a blanket line of credit right now on some rentals.  It's all about a relationship with the community banks. 

Bryan A., Carolinas Revitalization, LLC | [email protected] | 704‑905‑6510