Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes
I own outright two properties in San Diego that are providing steady combined rental income of approximately 4k a month after expenses. They are worth about 600k each. I would like to take out a HELOC on one of them, so that I can purchase more investment properties with BRRR in mind. I called my bank (Chase) and spoke with a loan officer and she told me they were unable to count my rental income on the house I wished to take out the HELOC, and therefore, my debt to income ratio is too low to qualify for a significant loan. It didn't matter that I have stellar credit and a pile of cash in their bank, or that I was asking for less than 50% LTV. What should my next steps be for finding money that is available for cash real estate deals? Should I keep looking to banks, or will I get the same story everywhere? Is hard money the only option and how does one transition to a conventional loan after rehab without running into the same issue? To complicate matters I live across the country in Vermont.
Give Bank of the West a call. They do HELOC on rental properties in California and they go up to 60% LTV (65% with some a manager override). I was in your same predicament, but came across another BP post that was asking this same question and someone recommended Bank of the West. I have not closed my loan yet, but from everything I have seen thus far the outlook is bright.
CHASE HAHA sorry:( .... truly I would call a local small bank usually a credit union. IF for some reason this still does not work you could always get a commercial loan using 1 or both homes as collateral especially if you want 300k and are willing to put up double if not 4X that amount .
I suppose I was mistaken thinking a national bank would be more willing to loan money. I'm with Chase because it was the bank my probate attorney used when I inherited the estate. I'm naive about borrowing money, what's the joke about Chase?
I'm in the same boat as you right now @Matthew Ware. Live in Arizona, inherited a SFR and duplex, free and clear, in Southern California, not San Diego however....
We are making gross income of $2495/mo on all three units. Properties are in an LLC and we are looking to get a HELOC or business LOC on them, but we haven't been able to find anyone that will lend to the LLC........yet.
The properties have about $325k equity in total, and we are looking to somewhere around a 50% LTV on them.
Jo Ann Lapin at Hanover MC may be able to help you out, I would give her a call if I were you. I have spoken to her about my situation, and her products didn't work for what I was looking for, but they may work for you.
If you are able to find anyone who will lend to you, would you let me know so I can get in contact with them as well?
M2C , Is stay away from Bankster Gangsters! Use a local Community Bank Or Credit Union. My wife & I prefer CU & it took a while to find one that did Business Accounts.
Also, PenFed is good, joined after listening to a Clark Howard Podcast. I'm not military, so I had to join ? Military Family Non Profit which enabled me to hook up w/ them.
Since they are currently Rentals, It will be hard to find a lender to lend a HELOC on an investment property. Most of the time it may be better to put it on your primary home for the HELOC, and use a cash out refinance on investment properties. Why not just keep the properties paid for ( you got prop 13 and a step up in depreciation bases ) or do a 1031 exchange before Trump tries to squash that? Your talking a 4-5 million dollar property/ exchange. You need to talk to a CPA/ Asset attorney / financial advisor asap SPEND THE MONEY and time. More than likely it will make the most sense to not touch anything and buy another primary home renting your current home out. ( safer in a high market ) If you just inherited the property you will not be able to show 2 years of tax returns so it may be tough. Most lenders should be able to use 75% of the current leases in place if less than 1 year landlord experience. The best advise would be to set up your team of Wealth professionals and watch out for sharks. Best of luck!
@Matthew Ware There are very few options for taking significant HELOCs on rental properties - given you own them free and clear, why wouldn't you take an actual 1st mortgage instead? That will be FARRRRRRR easier to do, you'll get better rates, and you'll be able to borrow more. Once you have the lump sum, there are options to invest it short term until you can deploy it to a new property. DM me if you want to know what I do.
Incidentally, the reason you're having DTI issues is that the income on those properties is too low for the equity they have. IIRC you've posted on this issue before, but you should be clearing at least $80k per year in net income from those properties, but they're only giving you ~$45k. From an investment perspective, your money isn't working efficiently here. And that's coming from a B&H investor here locally.
Short story, if you convince yourself to keep the properties, you'll want to get a 1st mortgage on them. You won't be able to borrow up to 70 or 75% because they aren't performing well as investments (from a current income perspective, at least).
Give Bank of the West a call. They do HELOC on rental properties in California and they go up to 60% LTV (65% with some a manager override). I was in your same predicament, but came across another BP post that was asking this same question and someone recommended Bank of the West. I have not closed my loan yet, but from everything I have seen thus far the outlook is bright.
I own outright two properties in San Diego that are providing steady combined rental income of approximately 4k a month after expenses. They are worth about 600k each. I would like to take out a HELOC on one of them, so that I can purchase more investment properties with BRRR in mind. I called my bank (Chase) and spoke with a loan officer and she told me they were unable to count my rental income on the house I wished to take out the HELOC, and therefore, my debt to income ratio is too low to qualify for a significant loan. It didn't matter that I have stellar credit and a pile of cash in their bank, or that I was asking for less than 50% LTV.
Stupid banks. I know this doesn't help but for whatever an "I feel your pain" comments helps, here ya go :)
P.J. Bremner I just got the Bank of the West name given to me from another investor friend. Haven't had a chance to give them a call yet, but I definitely will.
Brent Boltz I hadn't considered the 1031 option before. I don't have near the equity as Matthew Ware does, however, I should still be able to roll my properties into a decent investment if I did go that way, right? I've got about $325k equity, still waiting on an appraisal, but I think my property manager's estimate should be pretty close.
@Evan Bell there are a whole lot of factors that go into that answer. You will have to thoroughly break down your current investments performance and it's future outlook. I have a feeling yes you will be able to beat it by performing a 1031 however this is not something that you rush into. You will need to do a lot of due diligence. My grandfather told me that there was only one reason to sell and that was you found something better. Best of luck!
Brent Boltz definitely not rushing into anything. Just looking at all options. We will most likely hold onto these properties for at least the next 5 years, however, I would be interested to know what we might be able to 1031 them into.
the possibilities are endless, just have to find what your looking for. Me personally like the idea of large multi family and a family vacation property or two ;) Just depends on what you want!
@Evan Bell Remember that your capital gains tax is based on the difference between your adjusted income tax basis and your sales price. When you inherit property the basis is stepped up to the fair market value of the property on the date of the decedent's death. The holding period is long term for inherited property. You may have some depreciation recapture depending on how long you have held the property. As part of your analysis, consult your income tax advisor to calculate the income tax cost to sell as well as the cost to do a 1031.
I know local guys that would lend you money with a 1st TD against a rental. It's more expensive money than the banks but worth it if you want to continue to purchase.
Also, Union Bank might be willing to do that deal. Also California Bank and Trust.
@Evan Bell; i guess there's not specific joke about chase, but i think what @Nick Watkins was trying to point out was the inflexible nature of "money center" banks (think wells, chase, bofA), you now the big boys with trillions and billions in assets to really help out/build that relationship. I've definitely seen smaller community banks and credit unions (https://www.ncua.gov/analysis/Pages/locate.aspx; link to look up your local credit union); that have a smaller balance sheet and less assets as the money center banks as more receptive to building a relationship and finding a product that suits your need while also helping them earn some money on deposits.
Good Luck and keep us all posted. FYI, PenFed is not a bad route, very easy to deal with.