Line of credit on investment owned less than 2 years?

Question

Hi all. Long time podcast listener, first time poster. I'm in Michigan, Lansing to be precise. I own a rental property free and clear, and would like to borrow against it as part of a brrrr strategy. The trouble I'm having is, every lender I've talked to so far wants to see 2 years of rental income on my tax returns in order to count rent as income, and more importantly, they want me to have owned the property for 2 years  in order to be able to leverage it. Does anybody know of a lender who won't require me to have owned the house for two years? I initiated the land contract in April 2015, paid off the land contract in April 2016, and have had it rented since December 2015. So I'm at 18 months of sort-of ownership, 10 months of rental income, and 6 months of free and clear ownership. Thoughts?

Gabe Lopez · Answer

Hi John,Have you tried Eaton Federal Bank?  I know they will lend against a rental and last I knew, they only required 12 months of ownership.  That could have changed though.  Ken Seelman in their Grand Ledge branch can definitely answer that question for you.  Let me know if they can't do it as I might have some other resources for you.

Gabe Lopez · Answer

@John Krohn, @Corey McHenry might also be able to provide some insight for you.  There is a local real estate investor meetup this Thursday in Holt.  I suspect you could get a lot of other suggestions there from other investors who have gone through this process multiple times.EDIT: I just saw that the topic for the investor meetup is the BRRR strategy.  Hope you can make it!

John Krohn · Answer

@Daniel Callton hey man good to hear from you! Sorry for the delayed response, I wanted to see how things shook out. I'm still having trouble, though I have not checked out Eaton Federal yet @Gabe Lopez. I had gone down the road with Chemical Bank because their loan guy there had said yeah, we can do that for you. However, when the underwriters got a hold of it, they said they won't refinance for the actual value of the remodeled home because of the length of ownership. Instead, they did it for the purchase price, which was a measly $10k. I should probably have said no and checked out other options like the two mentioned in this thread, but they had already pulled my credit and I didn't want tons of banks all pulling my credit and knocking my score down. A mortgage lender had told me I could use HELOC funds as a down payment on a mortgage, so I was like ok, and went ahead and got the tiny HELOC. But now having tried to actually get the mortgage, the lender is telling me for investment properties I'm going to need another $15k in cash reserves above and beyond my down payment. So, I'm stuck, and obviously showing off my ignorance of how this all works. I wanted to grab a bigger property, but looks like I am stuck buying another sub 15k property...

Gabe Lopez · Answer

@Daniel Callton I've struggled to find lenders that will do < 50K loans for myself and for clients.  However, Eaton Federal bank will do them and have done many for me.  They are a portfolio lender and have some loan options that are hard to find elsewhere.

Daniel Callton · Answer

Hey John -

Long time!  Let me know if you get anywhere on this.  I don't think you'll run into a problem with the length of ownership.  My experience is that all of my rentals are sub 50K and I can't find anyone that wants to write investment loans that small.  I've found a couple of places that will do blanket loans over all of your rental property; however, they want a minimum of 10 properties (almost there!).  Let me know if you find anything. Good luck.

Brian Godlewski · Answer

I recently did a cash out refinance, conventional loan, after only 6 months of ownership and 2 months of rental income on a house in Michigan.  Small bank in Maryland called Howard Bank.

John Krohn · Answer

Thanks folks! I will check in to these leads. Any others are appreciated.

James Watts · Answer

I've had an excellent experience so far with a company called Fund and Grow.com. Through very smart and little known tactics they get you offers of 0% business credit cards for 6 - 18 months at a time from several banks which amounts to $50,000 - 250,000 of credit. The Credit is not tied to your personal credit (unless you default). If you need your personal credit cleaned up, they tackle that first. If you changed your strategy to fix and flip for these 18 months you could fund the purchase and remodel of one property at a time, transfer the balance when the introductory period ends or pay it off when the flip is sold. Be careful to be conservative and not overextend the amount of credit you're using in these perilous times.

Line of credit on investment owned less than 2 years?

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