Type of Loan to pull out Investment property Equity?

Question

What kind of loan should I be looking at? I have a rental property, single family, free and clear. I'd like to take out a loan on the equity to use for other investments. I'm in Texas. This is not my primary residence. I should also mention I have this property under an LLC.

Jay Hurst · Answer

The only fee cap law in Texas ONLY applies to homestead properties. Has nothing to do with non-owner occupied.

Charletta Goodman · Answer

@James Burciaga What did you end up doing? I read some of the comments and it may be a Texas thing, but for most other states you can't get HELOC or conventional lending when the property is in a LLC, as some are suggesting. Also, my plan, like yours is to get the equity out of the paid off property and not get an actual loan. Would love to hear how things worked out.

Jayson Cain · Answer

@James Burciaga You can get a HELOC or do a cash-out refinance to access equity of your investment property.

Jay Hurst · Answer

If you do the conventional loan option the title company would deed the loan over to your personal name at closing. Then you could transfer after the fact back to your LLC. On the DSCR loan you would not have to move it to your personal name at all.

and if the loan is reported on your credit report or not does not mean anything at all. Very common misconception with investors helped a longed by some LO's who SHOULD know better but assuming you are personally guarantying a loan (which you also will be) you are still responsible for the debt.

James Burciaga · Answer

So does that mean I would need to transfer title to my personal name, then transfer it back to the LLC after closing? Would that loan still show up on my credit report?

Jay Hurst · Answer

Absolutely you can. We do it all the time. There is no difference between Texas and any other state when it comes to a LLC or non-owner occupied properties. You can not close a conventional loan (Fannie/Freddie) in a LLC, but both Fannie/Freddie will allow you to transfer into a LLC after the fact.

Or, you can vest directly into a LLC at closing with a DSCR loan.

James Burciaga · Answer

I am looking for a long term loan, so that I can use the cash to invest in other properties. However I would also like the loan to be under my LLC. Is that doable in Texas?

Zach Wain · Answer

DCSR loan is 1 option - You can fund the loan and hold title in your LLC name, no income docs, you just need good credit and equity, and it must cash flow on long term rents.

Conventional loan is the best option - lowest rate and best overall deal. But, you need income to qualify. That is the big take away. If you have income, go conventional all day every day. Downside, title must be held in your personal name at closing.

Reach out if you have any questions.

Heith Reade · Answer

Thank you for sharing this. I dug a little deeper into this after reading your comment. I am only finding on the 50A6 loan. I took another LOs word for it who does more business in TX than me. Lesson learned LOL.

Jay Hurst · Answer

You have a variety of options and the best answer will depend on what you plan on using the funds for. If you need the funds for long terms needs you would be best to get a long term fixed rate. You can do that with a cash out refi using a 30 year fixed either my proving your income with tax returns/Pay stubs etc, or as mentioned above use a DSCR loan that would only look at the income of the property and nothing else.

If you want the funds for short term use (for example, to buy a house with cash and rehab to flip/ or refi to rent) then our pledged collateral program might work for you. Basically, the program allows you to leverage your equity to buy investment property at a high loan to value then rehab and refi or sell paying back the loan. Just depends on your situation.

Type of Loan to pull out Investment property Equity?

Type of Loan to pull out Investment property Equity?

Most Popular Reply

14 Replies