Lowell, MA 路 Member since 2014 路 335 posts 路 52 votes
Hello BiggerPockets,
I bought a 4-unit investment property a few years back in the Massachusetts market. Since then it has gone up in value a bit. I want to see if anyone has any opinion on what is the best way to cash out/pull money. I have been brainstorming on refinance cash out, 2nd mortgage, ... ect. What is your thought??
Real Estate Investor 路 Peabody, MA 路 Member since 2013 路 304 posts 路 91 votes
9y
Cash out refi will give you the most cash. Heloc will be limited more by your dti but you won't have to pay for the money while you're looking for your next investment
Lender 路 Glenview IL- CDLP NMLS#230554 路 Member since 2015 路 2k+ posts 路 747 votes
9y
They are few banks who offer HELOC for investment property. Cash out will be good option all depend what interest rate you have already and when you want to use this money.
So I have been talking to a few lenders around my area. Look like HELOC has such a high interest rate and it is variable. It is more ideal for a flipper. I don't know how well it would work for buy/hold investor.
One lender required me to roll over my old mortgage, and would base the HELOC on the new sum... I was laughing (yeah right ...) Just the interest only, it is 40% in addition to my current mortgage. The lady was pushing to have me take or consider that product. I told her to slow down and re-assess what she is offering me.
So far, the refinance cash out seems very desirable for me. It is just another mortgage and a few hundred dollars more, and my cash flow will be able to handle it nicely. For the refinance cash out, all the lenders I talked to can only go up to 70% LTV. As far as the value of the house is based on the appraisal which has different approximation from different lender. For this 4-unit, I have it under my name with large liability insurance. This is the first investment property I did..
Overall, I am just curious what other creative ideas that people are doing to get money out from their current holding. I have other buildings on stand by and ready to do similar thing (get cash out for further investment), but they are all 6-unit buildings.
Investor 路 searcy, AR 路 Member since 2016 路 147 posts 路 111 votes
9y
Are you wanting the cash to reinvest or spend?
If you are looking to reinvest you can leverage the equity in that property towards your next property and use the equity for down payment, closing costs, and cash out the extra. In this method, it is like a second mrtg, except the new property loan goes up by the amount of equity you use from the first property. You have to make sure the second property can carry the increase loan payment, but the first property loan stays the same.
Rental Property Investor 路 GA 路 Member since 2017 路 62 posts 路 44 votes
9y
Check out pentagon federal credit union for investment property heloc's they provide helocs with Ltv up to 95 percent. The same goes for navy federal credit union.
Lowell, MA 路 Member since 2014 路 335 posts 路 52 votes
9y
@Frantz Joseph thanks for the reference. I scanned through both lenders' site quickly, and they do offer pretty high LTV. Not sure if it is reflecting just 1-2 units as they are vague about it on their website. I might have to call them and check it out for clarification.
@Harjeet Bhatti That is corret .. 70% LTV is the max. I think from a conventional stand point, that is the max limit per the fannie mae guideline.
@Dustin Lavender Not sure what is the name of the loan you are referring to. I worked with one of the local lenders in the past. He can collateral my building, but he won't cover all the down payment for the new purchase. I need me to have skin in the game. Typically he required that I put in 10% , and use additional 10-15% from existing property. All and all, it is a total of 20-25% down payment for the new purchase.
Usually, I take out money for re-investment or new purchase. With buy/hold, capital is drying up pretty quickly. It usually takes sometime to accumulate more from W2 and minimal left over cash flow for growth investment.
Rental Property Investor 路 GA 路 Member since 2017 路 62 posts 路 44 votes
9y
Hi Chan,
Its up to 4 family. Above that amount of units your looking at a totally different product. there is a couple of tricks you can do to become a member with these credit unions even if your not affiliated to anyone in the armed forces. You can message me if you need details.
Investor 路 searcy, AR 路 Member since 2016 路 147 posts 路 111 votes
9y
@chan
@Chan K. it is just a conventional commercial mortgage. Just go to a local lender and tell them you want to leverage the equity in A to cover down and closing on B, and you want to cash out the rest. Classic leverage.
Lowell, MA 路 Member since 2017 路 143 posts 路 37 votes
9y
Hi Chan K.
A fellow Lowellian on BP Awesome!! I thought I was the only one lol. I just joined recently and starting my journey now to financial freedom. I too was thinking about refinancing my house and reinvesting the equity in another property.
Lowell, MA 路 Member since 2014 路 335 posts 路 52 votes
9y
@Antoine Martel I came to a conclusion to refinance too. The HELOC is not a fit for buy/hold investor. It might be good for a flipper. I have been working with a mortgage broker now, in progress. He worked with me in the past, 70% LTV.
@Khemaro N. Let catch up some coffee sometime. If our goal is aligning, we might be able to speed up the financial freedom and get out of the rat race early, lol... Fannie Mae has a good term for 1M-8M. It is too difficult to grind it out alone both from a capital and physical perspective. Your name sounds like you are a cambodian??
They are few banks who offer HELOC for investment property. Cash out will be good option all depend what interest rate you have already and when you want to use this money.
Harjeet,
Can you name the Banks that offer HELOC for investment Properties??
Frisco, TX 路 Member since 2017 路 201 posts 路 95 votes
9y
@Chan K. I know a top notch mortgage broker in your area if you would like a referral. I did many personal mortgages through him and referred many friends and clients as well. Message me if you want his info. He's a straight shooter.
Lowell, MA 路 Member since 2014 路 335 posts 路 52 votes
9y
@everyone that voted for me - thank you
@Raul R. feel free to check in with @Frantz Joseph, look like you are around his area. If you look at his response, you will find two references. I did a quick search on them, and they look pretty good. I think the questions are: what type of buy/hold investment are you looking to do HELOC on .. single family, multi-family under your name, multi-family (4+) in an LLC, they will have slightly different guideline and offer. You also need to have equity in your investment to begin the conversation about HELOC/2nd mortgage/refinance cash out .. etc. For the safe bet, I think a lot of banks you found on google will provide secured HELOC with at least 70% LTV. Single primary resident will have the highest LTV... high LTV and high appraisal will provide you with most money out .. assuming your credit and cash flow can sustain the ongoing re-payment.
Lender 路 Nationwide Lender 路 Member since 2015 路 1k+ posts 路 814 votes
9y
@Chan K. For Fannie/Freddie 2-4 unit investment cashout the max LTV is 70%. You can get a higher LTV (up to 85% LTV) with a portfolio loan, but you will take a hit on rate and points.
Lowell, MA 路 Member since 2014 路 335 posts 路 52 votes
9y
@Upen Patel Thank you for the feedback. Would you be able to give some references on the portfolio lenders that will consider the 85% LTV? I guess the portfolio lenders might not offer the best term either compared with the 70% LTV @ 30 years fixed, but it is good to have option for other alternative situation.
Rental Property Investor 路 GA 路 Member since 2017 路 62 posts 路 44 votes
9y
hi chan,
I had s long conversation with navy federal credit union and I found out they don't go helobs on multifamily homes馃槙They do work with first time investors who want to get a loan under an Llc. The business banker sent me a calculator that they use as a prescreener. If you want just send me a private message. I didn't see your request. I must of denied it by accident, Send it again please.