Advice On Funding a Down Payment

[Christian Leon]

Hello BP Community,

I am looking to buy my first multifamily property in Jacksonville, FL. I have a two properties I want to offer on in the $350K mark, but l need to come up with 15%-20% down payment. My original plan was to use a local FL bank to get a HELOC on one of my investment properties, use that to fund my down payment, and then pay it back within a year or so. Very few banks are doing HELOCs on investment properties right now ( I have called over 20 this week) so I wanted to ask if anyone has done a HELOC on an investment property as an out of state investor recently, and who they used? Any other creative approaches/advice for funding this down payment are also welcome! Cheers

[Tony Severance]

Since you know the amount you need to execute your purchase, I suggest you look at getting a HELOAN. This is different from a HELOC because it is a stand alone second lien that is a not an open line of credit, rather a loan for a set amount. For example, if you are approved to borrow $100K from the equity in your investment property, you take the entire $100K at once instead of drawing $25K here, $15K there, etc. as you would with a HELOC (which are unicorns in the industry right now). What type of properties are your other investments (SFR, 2-4 unit, Condo)?

[Doug Spence]

@Christian Leon I have a contact that can do an interest only HELOC on an investment property. The property has to be rented with a signed lease as proof, and you need to get an appraisal, pretty standard stuff for a HELOC. The fact that its IO is pretty unique though. Another problem you may run into is the time it takes for these loan products to get approved: it can take a while. I have not yet done one myself but I hear it can take 4-6 weeks, so you definitely want to have access to those funds before you start offering on the properties.

Have you considered private lending as a way to fund these deals? There are lots of folks out there with capital but without the time or desire to find deals like you have. 

Good luck!

[Erik Estrada]

Quote from @Christian Leon:

Hello BP Community,

I am looking to buy my first multifamily property in Jacksonville, FL. I have a two properties I want to offer on in the $350K mark, but l need to come up with 15%-20% down payment. My original plan was to use a local FL bank to get a HELOC on one of my investment properties, use that to fund my down payment, and then pay it back within a year or so. Very few banks are doing HELOCs on investment properties right now ( I have called over 20 this week) so I wanted to ask if anyone has done a HELOC on an investment property as an out of state investor recently, and who they used? Any other creative approaches/advice for funding this down payment are also welcome! Cheers

 You could look into doing a second position hard money loan on your investment property and combine it with a first on a purchase. Be aware of a balloon in 2 years.

If you do find a HELOC this can work to keep a line of credit open as opportunities come by. Very hard to find now though.

[Lucie Tighe]

@Katherine Blazer might be a great resource for you. 

[Christian Leon]

Quote from @Doug Spence:

@Christian Leon I have a contact that can do an interest only HELOC on an investment property. The property has to be rented with a signed lease as proof, and you need to get an appraisal, pretty standard stuff for a HELOC. The fact that its IO is pretty unique though. Another problem you may run into is the time it takes for these loan products to get approved: it can take a while. I have not yet done one myself but I hear it can take 4-6 weeks, so you definitely want to have access to those funds before you start offering on the properties.

Have you considered private lending as a way to fund these deals? There are lots of folks out there with capital but without the time or desire to find deals like you have. 

Good luck

Doug,

Thanks for the response! Would you mind sharing your contact? I am applying as we speak to different banks. I am shopping around and would love another bank to speak with! Feel free to private message me with that info.

I have considered private lending, but I fully intend to pay if off in the next year so I'd rather pay myself than someone else. Plus keeping the line open for future deals is a good tool to have in the bag for future potential properties. 

[Christian Leon]

Quote from @Tony Severance:

Since you know the amount you need to execute your purchase, I suggest you look at getting a HELOAN. This is different from a HELOC because it is a stand alone second lien that is a not an open line of credit, rather a loan for a set amount. For example, if you are approved to borrow $100K from the equity in your investment property, you take the entire $100K at once instead of drawing $25K here, $15K there, etc. as you would with a HELOC (which are unicorns in the industry right now). What type of properties are your other investments (SFR, 2-4 unit, Condo)?

Tony, 

Thanks for the reply! I considered a HELOAN if nothing else works but I plan to pay off the HELOC with in a year so I personally want to have that revolving door of credit for a future purchase as well. I'm looking at 4 unit buildings at the moment.

[Kristin King]

Hi there @Christian Leon, have you contacted the folks at myinvestorloan.com? They might look at a deal like this, otherwise you need to reach out to your network and JV with a PML to bring the down payment and be in 2nd position, OR, carry a note against that other investment property as collateral. Please reach out if you want to chat more about this! We might be able to help with funds for EM as well if you need it.

[Kailey Van Camp]

This is called gap funding and you will want to make sure your lender is okay with you doing it. There are still work-arounds and loop-holes, depending on your situation and where the funding comes from. 

[Tony Severance]

Hi @Christian Leon, I found a source for an investor HELOC in Florida. The initial loan is for the full amount you are approved for and choose to receive, then you can pay off as much as you like whenever you like and have that borrowing power available for the remaining draw period. I think is is a great solution for your situation!! DM me for more details.

[Tony Severance]

@Kailey Van Camp You are correct, some won't allow for this but most of the better DSCR lenders I work with allow for equity loans to be used to fund down payments. I recently had a foreign national do this to by three more investment properties in Florida. Unfortunately, the bank I referred him to stopped doing investor HELOCS. However, as I posted above, options are starting to open up.

[Kerry Baird]

I called Community Credit Union of Florida this week, and they told me will do HELOC on an investment property with a FICO of 720. CCUFlorida dot org.

[Casey CJ Noble]

I recently came across an ad for investment property HELOCs up to 90% LTV at 5dayheloc.com, however, I haven't had personal experience with this company so I can't vouch for them at this point.

[Eliott Elias]

Borrow money from a private investor and give them a monthly return 

[Dave McIntyre]

Hi Christian,

Another option that may be to get unsecured funding where you can use the funds for down payments/gap funding, as well as 100% funding of deals.

It's definitely available as there are lenders out there w/ less strict lending criteria than traditional banks that can help.

Also, they can report to your business credit and not your personal credit so it won't show on your personal credit.

Best,

Dave

[Jared Hottle]

Maybe see if a bank will cross-collateralize your current property or portfolio to cover the down payment. Sometimes that is much easier for them and less risk to you when it comes to fluctuating rates.