HELOC loans on Investment Property?

[Mike Crissy]

I own a duplex out right and was wondering if anybody has been able to secure a HELOC on an investment property? Is a HELOC only for primary residences? Thanks!

[Benjamin Aaker]

The HELOC (home equity line of credit) is for your primary residence and uses the residence as collateral. It has a lower variable interest rate. In my area, the LOC on an investment property is a commercial line of credit and is called a Business Line of Credit. The property is used as collateral and the interest rate is variable and higher. There is also a personal line of credit that has no collateral and has the highest interest rate. Avoid this one.

I use the business line of credit frequently. For mine, I have to have an initial appraisal done, then the bank will lend up to 80% of the equity I have in the property. The LOC sits unused without any interest, waiting to be spent instantly when I have a deal. There is an annual couple hundred dollar fee to keep it active. I think this is a great product.

The alternative is to take out a mortgage on your duplex. I like this less because you get the money and have to put it in a bank account while paying interest on the money, waiting for your next deal.