Problems getting Line of Credit from rental property

15 Replies

Hello there,

I am new in real estate investing. We have a property in Chicago with 200K equity in it. It was evaluated by an certified appraiser. It is more than 50% of the house's total value.

I am trying to get a line of credit up to 100K to invest in a multi-unit house. I just want to have the line of credit available so when I find the property, I can just go and pull the money out.

That unit is our second property now, we live in in Connecticut. We will be investing in Fairfield county in CT, in Norwalk and surrounding area.

I went to our mortgage broker that found us the initial mortgage in the unit to ask for the line of credit and he told us, he checked with 3 of his lenders and none-of-them really wants to open a line of credit for us because it is not our primary unit. 

I have been studying real estate for a while now and I thought there was a whole strategy around getting a second loan on your rental properties to keep investing but I am having a hard time to get this second loan on this second house.

Can anybody help me? Do you know lenders in Chicago or licensed in Illinois that would be okay with lending to a second property? 

If you are a lender, please feel free to contact me as well.

Thank you for everybody's help.

Take care!

Hi Serdar,  The bank where I hold my company accounts originally wouldn't give me a line of credit on my rental properties.  However, they did give me a nice 20 year loan that allowed me to purchase additional properties.  This year I was told that they would now do LOCs for businesses (didn't need collateral) so they gave me a line.  This is at BB&T but I would suggest that you spend time with the bank manager of your bank and ask what they can do for you.  Be prepared to come back with your financials so they can really spend time figuring out the products that will work best for you.  By the way, Banks really make a difference.  I also have accounts at other banks and they haven't been nearly as helpful.  BTW, Had in-laws that used to live in Norwalk, beautiful there.  Good luck.   Teresa

Banks seem to hate investors and you always have to find a creative way to get what you want. Have you checked with the local credit unions? Maybe a private lender who you could potentially use long term could do a private line of credit using the property as collateral. 

Charlie, I am not sure what cash out refinance exactly is but if it is just refinancing the whole loan, i am trying to avoid that. We have a good loan right now with a great rate, better than today's rates and we are about half way done on a 15 year old loan.

Teresa, I am going to look for banks/lenders that operate both in NY and IL or CT and IL to see if I can walk in and talk to somebody. I am trying to avoid big banks. I had terrible experience with Chase bank not too long ago. I will ask them about a 20 year loan. Is there a certain name for it? If you don't mind, what is your lenders name?

Thank you both!

You might have a great loan, but if your going to add a 2nd lien to the property, it makes more sense to redo the first lien and take the cashout.  Cash flow the new loan to pay it off at the same pace and you accomplish both goals and only have 1 Lien on your property, at more favorable rates than you will get with a 2nd.

@Charlie Fitzgerald is correct. You may look at the current refi rates as "higher than your current note", but they will certainly be better than someone taking 2nd position on your investment property. Refinance the whole thing - that's how you roll forward.

So, latest on this one, it is actually hard to find lenders that will give you HELOC on investment property. Many thanks to @Brie Schmidt , she advised me on couple lenders and one of them is not going to do it and other one I think, they will go for it. 

We also found one that might do it but LTV ratios are pretty low. So, beware, it is easier to refinance but hard to get an HELOC on investment property. Learning in progress :)

A HELOC is for primary residence. Commercial lenders will sometimes provide a LOC (not a HELOC) but generally most lenders are not in the business of doing second position liens, which ha LOC (and a HELOC) is. Charlie had the right answer.

Go to a small local bank, and see the Commercial lender, they will do in-house, or portfolio lending, brokers generally are for secondary market, im borrowing on the commercial side, 80% LTV at 4.5% paying only for a BPO, Title, and a couple hundred bucks origination.