No HELOCS on rentals in Texas

Private Lending & Conventional Mortgage Advice
7yFollow

No HELOCS on rentals in Texas

Keith A.
Rental Property Investor · TX · Member since 2019 · 236 posts · 392 votes

Well so much for my grande idea. My rentals have been all bought with the heloc on my primary. Well now I’d like to put the equity of my free and clear properties to use. My big idea was to get helocs on those properties but I just found out no can do in TX. Crud. Heloc is all I know. So now I’m watching vids on cash out refis.

Any Texas investors have a preferred way of using the equity of your free and clear Non owner occupied properties? Traditional investment property loan probably the worst idea? Thanks in advance.

1Reply
53 views

Most Popular Reply

Costin I.
Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
7y

@Keith A. @Carolyn Hodo - 

That unicorn does exist, but is called "portfolio LOC" or "asset based LOC". You just need to ask the right person for the right product at a bank.

1. Do not confuse HELOC (home equity line of credit) with HEL (home equity loan) - one is a "reusable" product, the other is a one time deal. LOC you get charged interest on the balance when used, the other you get charged interest on the whole balance from the moment you get it. LOC you can pay it down and reuse, the other you pay it down and gets closed.

2. There is no HELOC for an investment property. But you can get same thing - a line of credit (LOC) or portfolio LOC or asset based LOC - you just need to find the right bank and the right person in the bank who knows about this type of product (usually a commercial banker). Don't bother to ask a residential loan officer about HELOC on a rental, they will tell you "impossible" and not even know of alternatives.

Again: You can get an LOC on your rentals by asking a commercial lender about asset based LOC or portfolio LOC. A residential loan officer doesn't know about this product. We do have one LOC secured by two rentals that we use to make cash offers on properties we rehab, lease, refinance and repeat.

3. Shop around - the differences in LTV/LTC, fees, renewal fees, periods, terms, rates, closing, documentation required, etc. are substantial from bank to bank. You can see below a comparative sheet I used to bring them to an apple-to-apple comparison when I was looking for something like this 2 years ago.

4. You can get a portfolio LOC from several sources - I recommend Amplify CU (and to stay away from Wells Fargo). Most likely they offer portfolio loans too, that is an easier option to get usually.

[Note: this was from 2 years ago! Rates and conditions changed since then. We renewed ours at 6.25%. ]

Let me know if you have any questions or need more information.

8Reply
See this reply in the discussion

15 Replies

Jump to latestLatest
  • Carolyn Hodo
    College Station, TX · Member since 2018 · 17 posts · 10 votes
    7y

    @Keith A.

    I started to look into this a couple years ago... you can't do a line of credit but can do an equity loan - so you get all the money at one time. The one bank I talked to (Wells Fargo I think) would do it at 50% LTV. That's as far as I got because I didn't have quite that much equity in the house yet.

    0Reply
  • Costin I.
    Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
    7y

    @Keith A. @Carolyn Hodo - 

    That unicorn does exist, but is called "portfolio LOC" or "asset based LOC". You just need to ask the right person for the right product at a bank.

    1. Do not confuse HELOC (home equity line of credit) with HEL (home equity loan) - one is a "reusable" product, the other is a one time deal. LOC you get charged interest on the balance when used, the other you get charged interest on the whole balance from the moment you get it. LOC you can pay it down and reuse, the other you pay it down and gets closed.

    2. There is no HELOC for an investment property. But you can get same thing - a line of credit (LOC) or portfolio LOC or asset based LOC - you just need to find the right bank and the right person in the bank who knows about this type of product (usually a commercial banker). Don't bother to ask a residential loan officer about HELOC on a rental, they will tell you "impossible" and not even know of alternatives.

    Again: You can get an LOC on your rentals by asking a commercial lender about asset based LOC or portfolio LOC. A residential loan officer doesn't know about this product. We do have one LOC secured by two rentals that we use to make cash offers on properties we rehab, lease, refinance and repeat.

    3. Shop around - the differences in LTV/LTC, fees, renewal fees, periods, terms, rates, closing, documentation required, etc. are substantial from bank to bank. You can see below a comparative sheet I used to bring them to an apple-to-apple comparison when I was looking for something like this 2 years ago.

    4. You can get a portfolio LOC from several sources - I recommend Amplify CU (and to stay away from Wells Fargo). Most likely they offer portfolio loans too, that is an easier option to get usually.

    [Note: this was from 2 years ago! Rates and conditions changed since then. We renewed ours at 6.25%. ]

    Let me know if you have any questions or need more information.

    8Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    7y

    Try this: 

    Hurst Lending and Insurance, Investment property HELOC in Texas

    0Reply
  • Bruce C.
    Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Keith A. Refi to get 75% out is what I’ve done.  It’s pretty easy, and you can lock in the low rates we have now.  I do want to look @Costin I. ‘s info as I always talked to residential side. WF will do an investment HELOC to 60% in Texas I believe, which might be useful if you own them free and clear.

    1Reply
  • Keith A.
    OP
    Rental Property Investor · TX · Member since 2019 · 236 posts · 392 votes
    7y

    @Costin I.

    You are so helpful. I can’t thank you enough. Looks like I have lots of calls to make tomorrow.

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    @Keith A.

    I do cash out refis with my properties free and clear. I get 75% of the appraised value back to me in cash. I just inquired about doing this again to a property I bought in June and fixed up. The lender offered me a 4.125% interest rate for a 15 year loan. I’ll buy another property, fix it up and place a tenant in it. Then repeat.

    2Reply
  • Rick Taldykin
    Member since 2019 · 40 posts · 11 votes
    7y

    @Keith A. first off, sounds like you're on the right track, having free and clear properties to be able to put to use--congrats! Sounds like what you're after is an asset-based lender providing cash-out refi's. I've used them in the past on multiple properties, and depending on the property type, FiCo, and any compensating factors in your favor (reserves, seasoned investor, F&C properties), you can get really great rates. You should be able to get 75% LTV no problem on your properties.

    1Reply
  • Account Closed
    Rental Property Investor · Miami, FL · Member since 2014 · 80 posts · 55 votes
    7y

    @Kerry Baird I use Hurst and they do not do HELOCS on rentals.  Only cash out refi's and it takes months.

    0Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    7y

    HELOC is the link where I saw their claim that they do. I haven’t done one...sold my Texas property. 

    0Reply
  • Curtis H.
    Investor · Los Angeles, CA · Member since 2011 · 305 posts · 56 votes
    7y

    @Keith A.

    How did it end up working out for you? I have a rental in Round Rock with about $140K in equity and I'm trying to put that money aside to pick up another property. I don't want to cash out refinance, but will I that's the only option. Leaving $100K sitting there doing nothing just seems pointless to me. 

    0Reply
  • Bruce C.
    Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y
    Originally posted by @Jay Hurst:

    We actually do offer line of credit on non-owner in Texas but has to be in first lien position and the funds have to be used for business purpose. And we average under 30 days for a non-owner occupant closing with some as quick as 7 days. but not all borrowers, situations and programs are exactly the same.  

    Hi Jay - does that mean the only way to get the heloc is if you own the property free and clear first?

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    7y

    @Keith A. @Carolyn Hodo @Costin I. @Bruce C. @John Morgan and whomever else is interested...thanks for posting about this subject.  Bigger Pockets does have a pretty active Texas forum and this is one of the more common questions we get there.  Feel free to follow that forum as it has some pretty good locals that know a thing or two.  Usually when I field this answer out in the general forums it about finding this in ANY state so I'll answer it for Texas and for everyone else just in case it get's research.

    1. Texas - Cash out loans of any type are pretty challenging here in Texas.  Because of this many lenders won't do these loans at all.  Finding a lender that does investment property "Lines of Credit" is hard in any state...but here it's even harder.  I know 3 that write them locally in DFW...and only one of those will do it state wide.  But am certainly willing to share any information if you just PM me.  No problem.

    2. For everyone else....a small, local lender will be your HIGHEST probability of success when trying to find "Line of Credit" lenders on investment properties. The unfortunate thing here is that investment properties foreclose at a higher rate than primary homes so many banks just don't want the exposure to this. But it is 100% possible to find but you have to put in the time or at least know someone that ALREADY has the connection. Here's my 3 suggestions:

    1. Post in the Bigger Pockets STATE forum that you are looking in. There are usually some good, local investors that monitor those forums. Maybe they already have a suggestion or recommendation for you? Certainly try there.
    2. Visit your local REI groups. There are many groups that meet across the country. Some post here on Bigger Pockets. Many post on meetup.com. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you.
    3. Calling - and then there's this option. Which is what I had to do. I had to call about 200 lenders (no exaggeration) to learn of 4 lenders who did this and I have some tips. First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, try to ask for "LINES OF CREDIT" instead of "HELOC". I know it sounds like I'm splitting hairs but some banks write HELOCs in their residential department....which won't write Investment Properties. And that residential department will often not speak to the commercial department. So they'll just say "sorry, we don't do it"....not even knowing that they really do! So if you ask for a "line of credit on an investment property" that should get you to the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT.

    Hope this helps.  Thanks!

    3Reply
  • Jacob A.
    Grand Prairie, TX · Member since 2017 · 49 posts · 2 votes
    6y
    Originally posted by @Costin I.:

    @Keith A. @Carolyn Hodo - 

    That unicorn does exist, but is called "portfolio LOC" or "asset based LOC". You just need to ask the right person for the right product at a bank.

    1. Do not confuse HELOC (home equity line of credit) with HEL (home equity loan) - one is a "reusable" product, the other is a one time deal. LOC you get charged interest on the balance when used, the other you get charged interest on the whole balance from the moment you get it. LOC you can pay it down and reuse, the other you pay it down and gets closed.

    2. There is no HELOC for an investment property. But you can get same thing - a line of credit (LOC) or portfolio LOC or asset based LOC - you just need to find the right bank and the right person in the bank who knows about this type of product (usually a commercial banker). Don't bother to ask a residential loan officer about HELOC on a rental, they will tell you "impossible" and not even know of alternatives.

    Again: You can get an LOC on your rentals by asking a commercial lender about asset based LOC or portfolio LOC. A residential loan officer doesn't know about this product. We do have one LOC secured by two rentals that we use to make cash offers on properties we rehab, lease, refinance and repeat.

    3. Shop around - the differences in LTV/LTC, fees, renewal fees, periods, terms, rates, closing, documentation required, etc. are substantial from bank to bank. You can see below a comparative sheet I used to bring them to an apple-to-apple comparison when I was looking for something like this 2 years ago.

    4. You can get a portfolio LOC from several sources - I recommend Amplify CU (and to stay away from Wells Fargo). Most likely they offer portfolio loans too, that is an easier option to get usually.

    [Note: this was from 2 years ago! Rates and conditions changed since then. We renewed ours at 6.25%. ]

    Let me know if you have any questions or need more information.

    Are the terms for all the quotes between 1-2 years?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free