How to access equity for HELOC on MFR duplex in TX?
Member since 2024 · 8 posts · 5 votes
How to access equity for HELOC on MFR duplex in TX?
8 Replies
- Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes1y
Quote from @Brad Kremer:
Hi everyone,
I own a cash-flowing duplex in Austin, TX, that I bought 8 years ago when rates were considerably lower than they are today. I've got about $525K in equity in the property, but lenders have told me that I cannot get a HELOC to access that equity for additional purchases because the duplex was financed as an investment - they have said TX law dictates that HELOC can only be used on primary residences.
I don't want to refinance because my current rate is under 5% and doing so ruins the cash flow I've got right now. (gross rents $4900; 8% PM; mortgage+insur+taxes = $3600/mo). How do I access a portion of that equity to fund the purchase of 1-2 more MFR properties in more affordable markets like OH, IN, MI, PA, TN, or AL?
If a HELOC isn't an option due to Texas laws, you could consider a cash-out refinance with another property or a portfolio loan, even if you want to keep your current rate. Some lenders offer creative solutions, like a cross-collateralized loan, where they use your existing equity as security without refinancing the duplex.
Another idea is partnering with private lenders or exploring a second-position mortgage, depending on your lender's terms. If you're targeting MFR properties in more affordable markets, these options could free up the funds you need without disrupting your cash flow too much. Have you looked into local credit unions or alternative financing programs? Sometimes, smaller institutions are more flexible.
- Investor · Member since 2024 · 13 posts · 8 votes1y
I forwarded a DM. Lets connect!
- Member since 2024 · 8 posts · 5 votes1y
Hi Dominic,
thanks for the detailed response. I’ve spoken with one credit union but could definitely pursue that option more vigorously. I’ll have to research cross-collateralized loans too - I wasn’t aware anyone was doing that but it makes sense. - Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes1y
You're correct that Texas law prohibits HELOCs on investment properties—they are only allowed on primary residences. However, there are several alternative ways to access your equity without refinancing and losing your sub-5% mortgage rate.
1. Investment Property HELOC (Out-of-State Lender)
While Texas lenders won't issue a HELOC on an investment property, some out-of-state portfolio lenders and credit unions do offer investment property HELOCs in other states. You may need to structure it as a business-purpose loan under an LLC. Check with lenders outside of Texas that specialize in investment property HELOCs.
2. Home Equity Loan (Cash-Out) – Texas 50(a)(6)
- Texas allows a cash-out refinance on an investment property, but it would be treated as a 50(a)(6) loan, which can limit how much equity you can pull (typically 80% LTV max).
- Problem: This would replace your existing low-rate mortgage, which isn’t ideal.
3. Portfolio Loan or Cross-Collateral Loan
- Portfolio lenders (small banks, credit unions, private lenders) may offer a loan using the duplex as collateral while keeping your current mortgage intact.
- Cross-collateralization: Some lenders will let you pledge the equity in your Austin duplex as collateral for financing new acquisitions in Ohio, Indiana, Michigan, etc.
4. Business Line of Credit (BLOC)
- If you own the duplex in an LLC, you may be able to take out a business line of credit secured by the property.
- Even without an LLC, a lender may offer an unsecured business LOC based on your income, credit, and assets.
5. Private or Hard Money Lenders
- Private lenders might be willing to lend you 60-70% of your available equity with a second-position loan behind your first mortgage.
- Hard money lenders could provide short-term financing if you plan to BRRRR new acquisitions and repay quickly.
6. Seller Financing or Partnerships
If you're targeting MFR deals in OH, IN, MI, PA, TN, or AL, you could:
- Use seller financing on new deals instead of pulling equity.
- Bring in a partner who funds the down payment, and you contribute expertise and credit.
Best Move for You?
🔹 If you want to keep your mortgage intact, look into: ✅ Portfolio lenders for investment HELOCs or cross-collateral loans.
✅ Business LOCs (secured or unsecured).
✅ Hard money or private lenders for a short-term equity pull.🔹 If you're okay replacing your mortgage, consider: ✅ A Texas 50(a)(6) cash-out refinance (only if the numbers still work).
Let me know if you want lender recommendations for these options!
Quote from @Brad Kremer:
Hi everyone,
I own a cash-flowing duplex in Austin, TX, that I bought 8 years ago when rates were considerably lower than they are today. I've got about $525K in equity in the property, but lenders have told me that I cannot get a HELOC to access that equity for additional purchases because the duplex was financed as an investment - they have said TX law dictates that HELOC can only be used on primary residences.
I don't want to refinance because my current rate is under 5% and doing so ruins the cash flow I've got right now. (gross rents $4900; 8% PM; mortgage+insur+taxes = $3600/mo). How do I access a portion of that equity to fund the purchase of 1-2 more MFR properties in more affordable markets like OH, IN, MI, PA, TN, or AL?
@Brad Kremer There is NO such law in Texas that you cannot have a line of credit on a non owner occupied property. The biggest issue is that a lot of the lenders that do allow for non owner occupied lines of credit in other states are very automated in underwriting. (including the sponsor of this forum) And Texas DOES require careful underwriting because if a homestead a whole set of rules that no other state has do come into play. So, an automated lender just does not want to risk running a foul of those homestead issues. Just not enough business to alter how they do business in all the other states.
We do both second mortgages in the form of a line and a closed end second in Texas on non-owner occupied properties all the time.
Hurst Real Estate, INC4.991 Reviews- 1yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Brad Kremer just wanted to confirm some information here.
As mentioned just above, there is no law against a HELOC on an investment property. I can also show you a 2nd lien mortgage on a 2-4 unit investment property here in Texas. So, now you know 2 lenders that can write something for you here.
You are absolutely doing the right thing by reaching out to see if other investor have options - and there are even more resources for you on a local level. Several real estate investor groups meet in Austin on the regular. There might be some investors that know some local places that write these as well. Meetup or Eventbrite are two resources to know about. Not everyone can meet though. Sometimes we have family obligations or work in the way...but just wanted you to know that those do exist close to you.
Hope all of that makes sense but feel free to reach out with any questions. Thanks!
- Member since 2024 · 8 posts · 5 votes1ythanks for the clarification. next time I'm in Austin I'll see if there's a get-together happening to meet some people in person.
- Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes1y
I know someone who can do second lien positions in Tx. They'll let you get extended a total of 65% with both liens combined. So if the first lien let's say takes up 50% of the value, then they'll provide a second lien for 15% of the value. If the first lien is less than 50% then the second lien can be more and you don't have to break that first mortgage.
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