HELOC on rental properties?

7 Replies

I have several rental properties (Single family and duplex) that have no loans on them and fully occupied. I have gotten offers for traditional loans at 4% but they all come with about 10k in closing costs. I would prefer a HELOC or another type of line of credit. I don't need the money and would prefer to only pay for the money when I need it. I am fine with the variable rate vs fixed rate.

Are HELOCs offered on rentals?  Any suggestions or referrals?

Thank you.

HELOCs are offered on rental properties.  I have one.  Be prepared to talk to a lot of banks and or credit unions before you find one that is willing to play ball though.  (or maybe it was just me)  I went through at least 20 before I found one that would do it on a rental property.  Every bank seems to have their own rules on which their underwriting department will operate.  Pen Fed Credit Union worked for us.  Try them if your local bank or credit union doesn't want your business.  Only caveat is they don't want you to own more than 4 properties so if you can offload one to a family member or wife.  Main thing is that it is not in your name.

Good luck

In my experience, you can only do cash-out refinances on rentals. The HELOC is only for your primary residence.

The cheapest financing I have found on rentals are the refinances - personal loans, (most) private money, etc. is more expensive. 

@Scott Friedmann   There are definitely lenders that do HELOCs on rentals (I have two).  Like @Jean-Thierry Aleman pointed out though, you may just have to call around a bit because most lenders don't like to do them on rentals.  However, HELOCs are just products of the individual lenders that offer them, so each lender gets to make up their own rules.  So just because one lender says they don't do them, doesn't mean all lenders don't do them.  It just means that one lender doesn't do them.

HELOCs can be a good option if you're okay with the variable interest rate (I was too, plus there are usually options for locking in a fixed rate), and want something that only charges you interest when you actually use the money (unlike a cash-out refi which you have to start paying on as soon as you get the money whether you have a use for it or not), and prefer low or no closing costs (both of my HELOCs had zero closing costs).  

Anyway, here's a list of questions you can ask when calling around and talking to different lenders: What You Need to Know When Shopping for a HELOC.

Lastly, there are a bunch of other threads on here that you might want to research to get some info on specific lenders, etc. You can probably find most of these threads by searching "HELOC on rental" (or some variation of that) in the search bar.

Best of luck.

Your best bet is to go online and fill out the application which  you will have to do regardless.  @Kevin Romines put a link above.  Pen fed is great!  You will have to jump through some hoops but that is to be expected.  Not sure if they still require this but when I first hooked up with Penfed, I had to donate $100.00 to a military cause to be able to get my foot through the door and become a Pentagon Federal Credit Union member.  Small price to pay and you will be helping a worthy cause.  If you have military background, you might not need to do this.  I will message you privately with a name and number but again, filling out the application online is something you will need to do so I would just start there.

Yes, HELOC's can be used and depending on the bank you should have zero closing cost. The trick is understanding that its a "loan". Do not get caught up on the number make sure the Investment is worth the pull.

Good luck. 

CalPenn Ventures, LLC.