HELOC on Primary Home for Investment Property

10 Replies

Hello BP Collective!

This is a repost from another subforum as I didn't get any replies.  I just looked into getting a HELOC on a primary residence that we just purchased in January. To my surprise we got approved. My initial goal is to pay off a family member that loaned us $50k to help us get this primary residence, but it looks like we will have 50k left should we need it. It will be in my name alone. I'm wondering if we decide to use the rest of the HELOC funds on our first investment property using a conventional loan in my husband's name, will the HELOC affect his debt to credit ratio (and chances of getting approved for the mortgage loan) if its under my name?

This is still a ways off as we need to learn more and determine a market we'd like to get into. We are in Southern California so this would probably be out-of-state. Also, is it more prudent to aim for a cheaper property that would only require 30k downpayment and then we would have have 20k for repairs left over in the HELOC? We do have some cash reserves. We were going to use these cash reserves for improvements on our primary to help us get approved for a HELOC, but we may hold off on that now since we it looks like we can get approved without doing anything.

Any advice would be greatly appreciated. SOOOOOOOO new to this. :)

Thanks!

Christine

Updated less than a minute ago

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@Christine Sparks I believe it would show up as you are both on the house so any debt against it would still affect DTI but I'm not completely sure. I would certainly advise doing research on the OOS markets you are interested in and then decide on price point.

@Christine Sparks . Christine, first off if the primary home is owned by both you and your husband you will both be named on the HELOC unless you quit claim your husband off title. The HELOC will affect your husbands ability o qualify for a loan on an investment property.

As far as areas to purchase an investments property in Southern California. Right now the best areas I've found are he inland empire and high desert. The prices in those areas haven't appreciated as much as the LA, Orange, San Gabriel Valley areas. Especially the High desert (Hesperia, Victorville, Apple Valley.

On a side note I'm doing some flips in the San Gabriel Valley and inland empire and sometimes need a good electrician. Would like to connect with you guys.

Your best bet is investing out of state into something that doesn't require a large rehab budget. Since repair cost frequently goes over budget you need a larger cash reserve to cover. 

Also try to see if there are other people you can partner with to take on a larger project within 2-3 hours drive. You can spread the risk and also be able to checkout the ongoing renovations. Places like central valley/Fresno are potentially viable. 

@Joe Timko Thank you for the thorough reply! I thought that would be the case for the HELOC. Wish that wasn't the case, but will have to deal with it when the time comes I guess. I've thought about Inland Empire but never considered high desert. I will definitely take a look. Got and accepted your colleague request. :)

@Tony Lin Appreciate the advice!  Yes, ideally would like to keep it within driving distance.  My husband is very knowledgable when it comes to the rehab process and I know he would love to be able to keep an eye on it.  Adding Central Valley and Fresno to my list of markets to research.

Good luck to both of you on whatever deals you may be working on right now.

@Christine Sparks . Christine, I'm looking at single family homes in the High Desert between $160,000-$200,000. That are between 1200-1600 sq ft. Have an offer I'm waiting to hear back from in Hesperia that is an REO for $168,000. As a flip should sell between $265,000-$275,000 not a lot of profit but could also rent for about $1250-$1400. I'm very hands on and could not see myself going out on state.

@Joe Timko Good luck on the REO. May I ask how you found it? What is your method for finding deals. Those prices are very doable! I'm more ok with doing out of state deals, but my husband is like you and would prefer to be hands on. Thank you again for your input.

@Jeff Zimmerman   Thank you Jeff!  I will reach out.

Originally posted by @Joe Timko :

@Christine Sparks. Christine, first off if the primary home is owned by both you and your husband you will both be named on the HELOC unless you quit claim your husband off title. The HELOC will affect your husbands ability o qualify for a loan on an investment property.

As far as areas to purchase an investments property in Southern California. Right now the best areas I've found are he inland empire and high desert. The prices in those areas haven't appreciated as much as the LA, Orange, San Gabriel Valley areas. Especially the High desert (Hesperia, Victorville, Apple Valley.

On a side note I'm doing some flips in the San Gabriel Valley and inland empire and sometimes need a good electrician. Would like to connect with you guys.

 I thought only one spouse needs to be on loan even in community property state... IF the spouse signs consent.