HELOC vs. Cash Our Refi

6 Replies

Hi all! Newbie here (7 years of experience of running real estate investment fund but first deal of my own). I am ready to buy my first rental using BRRRR. I am pretty much clear on the B and first two of Rs. My question relates to the 3rd R, which is "Refinance". Property will be in LLC due to certain restrictions that apply on a family level so I am limited to everything that is non Fannie/Freddie conforming. I am deciding between non-owner occupied HELOC or commercial refi loan. I am inclining towards HELOC since 1) I see certain credit unions offer up to 80% to 90% of LTV; 2) I will not immediately need all amount of available line so I may make draws as needed. Also tempted (very much) to use % only option that comes with many HELOCs. Any advice against using non-owner occupied HELOC to drag money out of the property? P.S. Will be buying all cash. TIA for your opinions.

@Marina Startseva

Finding a lender that will do a non-owner occupied HELOC is uncommon, as few lenders offer them on investment property. Now have ownership via an entity such as LLC, and you'll be challenged to find that lender.

If you do have a Florida lender that will do one with the conditions we have agreed upon, please let me know, as I have been gathering a list of such lenders. 

Lines of credit, in the commercial world might be called HEL or LOC.

You're not going to get a HELOC with an LTV greater than 80% on a non-owner occupied property, @Marina Startseva . There are a lot of advantages to HELOCs, if you're using them for short-term debt--to do another BRRRR, for example.

Have you talked to the CUs about their commercial products? You may surprised by how friendly the terms are. Often competitive with conforming residential mortgages. Maybe a slightly higher rate or a rate reset after 5-10 years. Could always split the difference. 50% LTV refi, HELOC that covers the remaining 30% to use if you need it.

Thank you for replying! There are few that offer non-owner occupied HELOCS including PENFED that comes widely recommended. However I'm struggling with finding one that will lend on a property that is held in LLC name... 

Originally posted by @Kerry Baird :

@Marina Startseva

Finding a lender that will do a non-owner occupied HELOC is uncommon, as few lenders offer them on investment property. Now have ownership via an entity such as LLC, and you'll be challenged to find that lender.

If you do have a Florida lender that will do one with the conditions we have agreed upon, please let me know, as I have been gathering a list of such lenders. 

Lines of credit, in the commercial world might be called HEL or LOC.

 

Thank you for responding! I would be happy with 80% LTV :) I came across 90% that was for owner-occupied (my bad, sorry). I am researching my local CUs currently

Originally posted by @Jaysen Medhurst :

You're not going to get a HELOC with an LTV greater than 80% on a non-owner occupied property, @Marina Startseva. There are a lot of advantages to HELOCs, if you're using them for short-term debt--to do another BRRRR, for example.

Have you talked to the CUs about their commercial products? You may surprised by how friendly the terms are. Often competitive with conforming residential mortgages. Maybe a slightly higher rate or a rate reset after 5-10 years. Could always split the difference. 50% LTV refi, HELOC that covers the remaining 30% to use if you need it.

 

need to focus first on locating a lender (s) that is able to lend to a LLC ( there are not many ) .....once you locate these lenders , then ask what options for loan programs they have ......there will not be as many options as compared to taking the loan in your personal names ( which it sounds like you are already aware of ) ...good luck

Thank you! Yes, I am coming to this realization...

Originally posted by @Dave Skow :

need to focus first on locating a lender (s) that is able to lend to a LLC ( there are not many ) .....once you locate these lenders , then ask what options for loan programs they have ......there will not be as many options as compared to taking the loan in your personal names ( which it sounds like you are already aware of ) ...good luck