How to get renovations finances for Rental Property

[Cathy Bui]

Hi all,

I have a triplex rental property which I do not live in. I wish to do renovations on it. The lenders I've spoken to do not offer HELOC or home equity loans for triplex rental properties. I've only found cash out refinances but I currently have a good rate on my mortgage and don't wish to leave that. Can anyone offer ideas on how I could gain funds for renovations without putting too much of cash into it? Thank you all!

[Jason Wray]

Cathy,

It's tough as a new investor to digest losing a low rate in order to take cash out through a refinance. You need to evaluate the burn rate and the equitable positon you will be in (ARV) after the renovations and repairs on top of the future growth by having a better crub appeal and higher construction rating.

Even though you have a low rate do not let it stop you from using the equity through a cash out refinance.  Because you can do a couple of things to get back to that low rates down the road.  You can take advantage of a rate buydown during the cash out refinance.  You can also wait 12-24 months when rates start to drop and also do a rate buy down to get back to the original rate.

The rate buy down pays for itself over time and the cash allows you to gain more passive income through higher rents or a down payment for another home.  Maybe consider taking out enough for a small down payment and renovations so you kill two birds with one stone!

[Steve Vaughan]

Quote from @Cathy Bui:

Hi all,

I have a triplex rental property which I do not live in. I wish to do renovations on it. The lenders I've spoken to do not offer HELOC or home equity loans for triplex rental properties. I've only found cash out refinances but I currently have a good rate on my mortgage and don't wish to leave that. Can anyone offer ideas on how I could gain funds for renovations without putting too much of cash into it? Thank you all!

In the past I've done as much work as I can myself and purchased materials on credit either through the stores or on credit cards.   
How extensive are you planning to go?  More than paint and flooring?    I've refinished tons of wood floors,  cabinets and countertops for inexpensive upgrades as well.  

[Olivia Grabka]

@Cathy Bui. How much money do you need? If its less than $30k and you have good credit, get a personal loan from the bank & use your profits from the rental to pay it off. The cash out refi is your other option, but the interest rate will cut into your profits more than the personal loan option. A HELOC option is available, I know TD Bank will do it, but they do a cross collateralized loan across everything you own.

[Frank Greg]

@Cathy Bui:

If this is for an investment property, you certainly want to look into the private funds route.

[Jared Rine]

@Cathy Bui..where is the property?  Is it in Sacramento?  How much do you need for renovations?   Will doing renovations create more value/equity in the property and allow you to increase rents?  I'm interested to hear more.  PM if needed.  Thanks,

[Eliott Elias]

Borrow the money from a private investor. 

[Stephanie P.]

Quote from @Cathy Bui:

Hi all,

I have a triplex rental property which I do not live in. I wish to do renovations on it. The lenders I've spoken to do not offer HELOC or home equity loans for triplex rental properties. I've only found cash out refinances but I currently have a good rate on my mortgage and don't wish to leave that. Can anyone offer ideas on how I could gain funds for renovations without putting too much of cash into it? Thank you all!

Credit cards. Personal loans. HELOC on your primary residence. All of those would work.

[Cathy Bui]

I didn't know about the private loans option. That is interesting to me! I also never thought credit cards should be considered based on financial advice outside of real estate investing so it's interesting to know that some of y'all advice credit cards. I could see how if a renovation is done quickly, it's a good option! I'm looking forward to investigating further and seeing others weigh in.

[Sam Bader]

Hi Cathy, is this property in a business name or personal name?  If it is in a business name I may be able to offer funds to help with the remodel... Let me know thanks

[Cathy Bui]

@Sam BaderAt the moment, the property is under personal name. You're the second person who mentioned eligibility based on business vs personal name ownership. Perhaps I should consider switching it from personal to business.

[Erik Estrada]

Hey Cathy, 

They just released a second mortgage option on non owner occupied residences. You can do both full doc and bank statement only. 

CLTV is up to 75% (1st + 2nd) on bank statement only

CLTV is up to 80% (1st + 2nd) on a full doc loan

Maximum Loan amount is $450k, terms are 10,15 yr, 30 yr fixed fully amortized loan. 

[Tony Guarino]

Hey Cathy, 

I see a few people here mentioned credit cards. I have financed several renovations and capital projects on interest free credit cards (One for 12 months, one for 18 Months). I went to the bank who I set up a personal account with and asked if they had any promotional offers. 

I always paid them down during the interest free period, but definitely something to ask your local banker. 

Best of luck! 

[Peter Brown]

Quote from @Steve Vaughan:

Quote from @Cathy Bui:

Hi all,

I have a triplex rental property which I do not live in. I wish to do renovations on it. The lenders I've spoken to do not offer HELOC or home equity loans for triplex rental properties. I've only found cash out refinances but I currently have a good rate on my mortgage and don't wish to leave that. Can anyone offer ideas on how I could gain funds for renovations without putting too much of cash into it? Thank you all!

In the past I've done as much work as I can myself and purchased materials on credit either through the stores or on credit cards.   
How extensive are you planning to go?  More than paint and flooring?    I've refinished tons of wood floors,  cabinets and countertops for inexpensive upgrades as well.  

 LOL...I thought I was the only one who DIY's :)  My challenge has been to get out of the DIY mindset to be more an investor and less an amateur contractor. 

[Nash Mittelman]

Are you going to sell it? Compass Concierge is a great way to pull out cash, and you can pay it back at 0% interest when you close on the deal if you were looking to sell.... 

[John Carbone]

Quote from @Erik Estrada:

Hey Cathy, 

They just released a second mortgage option on non owner occupied residences. You can do both full doc and bank statement only. 

CLTV is up to 75% (1st + 2nd) on bank statement only

CLTV is up to 80% (1st + 2nd) on a full doc loan

Maximum Loan amount is $450k, terms are 10,15 yr, 30 yr fixed fully amortized loan. 

 Is this only California? Are there population density limits? I’m in the smokies. 

[John Morgan]

@Cathy Bui

I do my rehabs with zero interest for a year credit card convenience checks from Citi. They give me up to 25k with a 3% processing fee. 3% for a year to borrow 25k helps me immensely. I’ve opened up a few new credit cards that gave me 0% for up to 12-18 months as well. That bought me enough time to pay them off. And I’ve done a few 401k loans up to 50k for rehabs. Then I pay these all off asap and repeat. I’ve also opened up a consumer line of credit with my credit union for 25k. The interest rate is high. But sometimes you need 25k on a moments notice to rehab or buy a new rental if a great deal falls in your lap.

[John Carbone]

Quote from @John Morgan:

@Cathy Bui

I do my rehabs with zero interest for a year credit card convenience checks from Citi. They give me up to 25k with a 3% processing fee. 3% for a year to borrow 25k helps me immensely. I’ve opened up a few new credit cards that gave me 0% for up to 12-18 months as well. That bought me enough time to pay them off. And I’ve done a few 401k loans up to 50k for rehabs. Then I pay these all off asap and repeat. I’ve also opened up a consumer line of credit with my credit union for 25k. The interest rate is high. But sometimes you need 25k on a moments notice to rehab or buy a new rental if a great deal falls in your lap.

 I’ve done this as well, but since rates have gone up I haven’t seen the offers like this. Are you still seeing these offers?

[John Morgan]

Quote from @John Carbone:

Quote from @John Morgan:

@Cathy Bui

I do my rehabs with zero interest for a year credit card convenience checks from Citi. They give me up to 25k with a 3% processing fee. 3% for a year to borrow 25k helps me immensely. I’ve opened up a few new credit cards that gave me 0% for up to 12-18 months as well. That bought me enough time to pay them off. And I’ve done a few 401k loans up to 50k for rehabs. Then I pay these all off asap and repeat. I’ve also opened up a consumer line of credit with my credit union for 25k. The interest rate is high. But sometimes you need 25k on a moments notice to rehab or buy a new rental if a great deal falls in your lap.

 I’ve done this as well, but since rates have gone up I haven’t seen the offers like this. Are you still seeing these offers?

Yes, Citi keeps sending me these offers. But instead of a 3% processing fee, I’m seeing them charge a 5% processing fee. So you’re basically getting a 25k loan for 5% interest for a year. Not great, but not bad. 

[Sam Bader]

Hi Cathy, I've figured out a way to get you the funds without changing the real estate to a business name.  If your interested you can DM me...

[Jason Bowden]

Hey Cathy, you're probably looking at going the personal loan route. How much do you need for renovations?