How to tap equity in single family rental property?

4 Replies

I have a single family home rental property with no mortgage.  What is the best strategy to use the equity in this property to buy additional properties?

Hi @Ben Schofield ; what is the property's value? If it's above $75k it makes things easier for you and gives you more options.

The first step would be speaking to a local community bank/portfolio lender. If you do not options through those entities, then private lenders or non-bank direct lenders (offering long term financing on a rental property) would be your best bet.

@Ben Schofield If you go with a conventional loan, i.e. Fannie Mae / Freddie mac, then you can pull up to 75% cash out on the refinance. Some investors like to consider lines of credit, however they are hard to find for rental property and can be just as limiting on the LTV as the cash out. They are out there, but you will have to look a bit to find them.

If you want a line of credit, I would look at your local credit unions and community banks. Otherwise any mortgage lender can do the Fannie Mae 75% cash on the rental. Good luck!!!

I'm hoping to find something better then conventional  Fannie/Freddie loans.  Are banks/credit unions doing blanket portfolio loans such that a second property is fully financed with first lien positions on both properties?  Has to be something more creative out there than conventional financing and all the fees associated with two separate transactions to acquire the second property.

@Ben Schofield , I just went through a similar situation with one of my rental homes, and my experience was as @Kevin R. described. I looked at HELOC, but my local credit union would only do a HELOC for 75% LTV up to $50k max. The interest rate would have been 2 points higher than a mortgage on a primary residence. I might have been ok with the rate, but I wanted a lot more of my equity than the $50k max. So I decided to just cash-out refinance. I didn't do a lot of searching around, so maybe there are other options. Just thought I'd share my experience. Good luck!

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