How to use equity to fund new development.

Question

I have a duplex in Maine that I have a ton of equity in. It also has a mobile on the property, all three units are long term rentals.
I want to use that equity to get a loan to pay for a well, septic, and mobile home at a property I bought in Joshua Tree, San Bernardino County California.
I've never done a HELOC before, is that what I should be looking at for this project?

Andrew Postell · Answer

@Eric Mcginn this type of a property might pose some challenges...mostly because of the presence of a mobile home on it.  I would guess you would need to reach out to a local bank for this.  Meaning, local to your property.  When calling banks      target the smallest most community based banks you can first. If you have      never heard of them, and they have one location - that's a good candidate.      No big, national, publicly traded banks will do this loan type. Second,      try to ask for "LINES OF CREDIT" instead of "HELOC". I      know it sounds like I'm splitting hairs but some banks write HELOCs in      their residential department....which won't write Investment Properties.      And that residential department will often not speak to the commercial department. So they'll      just say "sorry, we don't do it"....not even knowing that they      really do! So if you ask for a "line of credit on an investment      property" that should get you to the COMMERCIAL division. That's the      section of the bank we want. Now, most of these smaller banks may only      have 12 employees or so. So don't get frustrated if they don't return your      call or aren't in the office. Just call back and be friendly. Maybe play      dumb a little "I don't know if I'm in the right place..."      "I'm sorry to disturb you, you may not be the right person for      this....", etc. Maybe someone can get you to the right person. Again,      be prepared to call A LOT.  Maybe there's a solution for you somewhere out there.

John Cardinale · Answer

I’ve used a HELOC for heavy renovations before without renovation loan. One of the negatives with this strategy is there isn’t a third party inspector involved which there would be if I had used a renovation loan. With only a HELOC you would be the one deciding if your contractor has completed enough work for the draws requested. From my personal experience, this was challenging and I much rather not carry this burden.

Blake Alan Quarrie · Answer

Hey Eric,

Yes, a HELOC would be your most straightforward equity financing option for this project. Here's an article for additional information regarding HELOCs - https://www.nerdwallet.com/article/mortgages/heloc-home-equi...

Good luck!

How to use equity to fund new development.

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