SFH Cash Out Refi vs. Heloc in Tampa FL area

26 Replies

Hey to the amazing BP community.  Need some help with $$$ questions.

I'm in the process of purchasing my first SFH (buy and hold) properties in Florida and curious about financing. To close fast and get better pricing I am paying cash for the properties, rehabbing them and then will rent them out (BRRR). I used my Heloc on my primary for this.

I am looking for tips regarding refinancing to buy additional properties.  Would you recommend a Cash out Refi (I'm getting quoted 4.5-5K in closing costs and 4.75%), vs. Fixed Interest Heloc (no crazy closing costs from my experience w my primary).

My questions:  

What route would you go with? Pros/cons

For Heloc, can you recommend a bank in FL that's favorable to investors?

I like your strategy on using your primary HELOC to purchase a rental. Ok this is close to the strategy I will use in my flip process. Paying cash for the 1st rental is key and it is great you have the equity from your primary to do this.

So I spoke with one lender that deals with investment financing and this is the method.  

1: buy house with cash

2: remodel and improve with intention of buying into equity

3: (this is the tricky part with time)  Wait 6 months (some make u wait 12mo)  and get reappraised with intention of financing for 70% the appraised equity.

4: Use the 70% pulled from 1st home to buy your 2nd property.

This method works better in flips because once the 1st home is sold you can do the method over agian.  Kind of leap frog method.  You always have one home in the works as one is sold. 

As for lenders in Florida.  I will be using VanDyk Mortgage.  They will lend up to 10 notes.  Give me a Private message and I can give you my contact person I speak with directly. 

I hope this helps you and good luck

Originally posted by @Brian Johnson :

I like your strategy on using your primary HELOC to purchase a rental. Ok this is close to the strategy I will use in my flip process. Paying cash for the 1st rental is key and it is great you have the equity from your primary to do this.

So I spoke with one lender that deals with investment financing and this is the method.  

1: buy house with cash

2: remodel and improve with intention of buying into equity

3: (this is the tricky part with time)  Wait 6 months (some make u wait 12mo)  and get reappraised with intention of financing for 70% the appraised equity.

4: Use the 70% pulled from 1st home to buy your 2nd property.

This method works better in flips because once the 1st home is sold you can do the method over agian.  Kind of leap frog method.  You always have one home in the works as one is sold. 

As for lenders in Florida.  I will be using VanDyk Mortgage.  They will lend up to 10 notes.  Give me a Private message and I can give you my contact person I speak with directly. 

I hope this helps you and good luck

 I fully agree.  However, #3 is tricky.  Some banks want 12 months, others 6.  There's even a bank I deal with that will do 90 days.  So, I'd say for OP to do his homework in finding that perfect bank.  Getting the Refinance part of the R's quickly is crucial in the beginning if you want to grow quickly.

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@Brian Johnson thank you- the traditional process of financing after (or before) 6 months using a cash out Refi is clear to me and I have all the costs.  I'm good with that.

I'm still wondering if anyone is doing it with a fixed interest Heloc (to lock the rate) on the rental property and what the cons are to that.  That's the only dilemma I still have.  

Would you guys max out the HELOC from your primary? I mean, do you convert as much of the equity as possible or you have some threshold?

I ask because dealing with my own roof freaks me out a bit :)

Thanks!

@Allende Hernandez I am using my primay Heloc for a very short time.  It saves me money and time when I invest in a rental because I can make a cash offer with fast closing and sellers love that.  I had an offer accepted that was 5K less than another buyer because the seller didn't want to wait 30 days for the other guy to secure a mortgage.

The risk to me is low- I don't wait the 6 months because my rehabs are actually pretty low in cost (mostly cosmetic) so I'm good with refinancing 75% of the purchase price.  Therefore I have personal exposure on my primary for up to two months.  This of course gets more tricky/risky if you do not have the 25% cash/rehab/closing costs and you are exposed on your primary heloc for those.

Well I did a Heloc one time to buy a property.  My only complaint was a annual fee and the interest rates are higher.  Maybe they have changed but that was my only complaint. A conventional loan works better for me. 

One other idea is if you have a 401K.  Some 401K systems you can borrow from them and pay yourself back at a interest. 

Thank you for your response Yael T.!

So you use your own cash for the down payment (25%) and repairs and the rest from your HELOC(75%)?

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Instead of a HELOC, I'd encourage you to investigate a PLOC-- Personal Line of Credit. This is uncollateralized, so it's not tied to any asset or property. It's basically just a big ol' credit card that you use when you need it. This is the basis of my strategy. I buy properties with one PLOC, reno with the other PLOC, then either sell the property (if flip) or cash out refi (if hold), pay down the principals, and rinse and repeat, never using a dime of my own money. This isn't the path to instant riches-- it's slow and methodical, but it's working for me (two flips and one hold property over the last 1.5 years).

It took a few weeks of work, but eventually I found two local Tampa banks (big banks pretty much just laughed) that offered me fantastic terms on a PLOC (one is 1% over Prime and the other is 2% over Prime). I called over 25 banks and had four or five in-person meetings (be prepared and have a pitch proposal). There aren't too many banks that offer this product, and now even one of the banks I have a PLOC with no longer offers it. Just keep calling until you get a YES! Now, when you do get a bank to say YES!-- make sure you're getting the terms you want. Try Pilot and Synovus banks.

If you have long-term, documented income (W-2), credit score over 700, and your debt-to-income ratio is low, you stand a pretty good chance. Obviously there are other criteria the bank uses, but I'm not well-versed enough to know which are weighted more heavily than others.

Perhaps some lenders / bankers can offer some advice? 

<read in New Yawk accent> Hey, what's a guy gotta do around here to get a decent PLOC, yo? ;)

@Mark J. I would love to connect with you! I hear quite a bit about purchasing without using personal money but I never seen anyone break it down in detail. I live in St. Pete and just purchased a duplex in Port Charlotte but I used my own money. I'd love to connect and know more about how you do it as my goal is to purchase about 7 more properties.

@Ellie T. I think because I commented on it :) BTW, which option did you end up going with? I really like the idea of a HELOC on my primary so I can purchase another property but I'm still a newbie: I want to refinance to get a smaller monthly payment on my property, take some equity towards a new property but a HELOC offers the same.

I’m not flipping - Just buy and hold.

@Symone Gordon I did use my heloc

And bought 3 properties in “cash”. I fully paid off my heloc from the rents and doing a cash out refi (the price appreciated like crazy) and using it to buy more properties now.

Very happy to connect! DM me :)