Hello BP community! I have a question about the 6 month reserve required whenever you finance a property. Could I take cash from my HELOC, transfer it to my checking/savings account, and that be my reserve? After financing is finished, I could pay off my HELOC and repeat with next property. Is this a loophole around the the reserve?
I'm not sure how the lender feels about it, but the reserve is there for a reason. I sleep better knowing I have 6 mos for the rentals, and my personal life also if something comes up.
You might defeat the purpose as your DTI would be higher after borrowing your reserves. You also might run into seasoning issues with the money being deposited from the HELOC advance. Additionally, generally you are not allowed to borrow down payment or reserves.
You'd have to deposit the funds 3 months out so we don't see it when we ask for 2 months of bank statements.
You'd have to pay interest for these 4 months (the one month you are in escrow), of course.
So you're paying interest on your fake six months PITI reserves for four months just to fake having six months... which in turn is going to make it harder to get an honest six months because you're throwing money away on your fake six months!! Why not just save up six months the old fashioned honest way? If you're buying good investment properties and managing them well, a six month "oh siht" fund shouldn't be hard, and isn't a bad idea even if it weren't a lender requirement.
And ya the payment on your fake six months would impact your DTI.
Let me ask you: Do you always have 3 months advance notice for when a great deal is going to fall in your lap that you've got to move on right damn now?