$60k in equity in my rental...what to do next?

Question

Hey Everyone,

This is my second post on BP and I'm hoping to gain some insight.

My wife and I have successfully completed 2 live in flips and are sitting in a great position equity wise. We have a HELOC for $60k on the 2nd flip house that we are living in. We sold the first and gained $30k and rolled that into the second and then made another $30k. We should have held most of the cash, I know, but we were not thinking long term business at the time. It was just a hobby.

Anyways, we put an offer in on an acreage property that we want to raise our family on and will eventually remodel/rebuild the house on that property when the time is right. The problem is, our HELOC will obviously be gone when the deal goes through and this house is converted into an investment property.

With this house and our new property under contract, we will be close to our max DTI. We were under contract for an investment property using the HELOC that I ended up wholesaling to a family member this past week. We had plans to use the HELOC as a base to build our portfolio further with flips and rentals.

Now we will have our dream property and a great rental cash flowing $550/month that we intend to save and reinvest later.

I say all that to say, what options do we have to tap into the equity in the rental? I know we could look at a refinance for a large portion of it, but then we lose the cash flow. That and we recently had a refi on it to clear up the cost of reno. We didn't plan to move when we did that. So, is my only option to look commercial and leverage the equity?

Hoping someone out there has some ideas. I'm good with waiting a while to do something, but wanting to plan next steps and be strategic. Thanks for reading this long post and for your input.

Mike D. · Answer

Your situation is pretty complex, but after reading your post a few times I think I understand the question. So basically you have a property that you are currently living in that you have a HELOC on, and the bank is going to force you to close the HELOC once you convert it to an investment property, and you want to retain access to the ability to take out funds whenever you want without doing a conventional refi - is that right? My first question is, how is the bank going to know that it's now an investment property? I don't think the bank is going to raise a ruckus about a loan that's paid fully and on time. Also, some banks will do HELOCs on investment properties. If you make enough phone calls, you'll probably find one. Does that help?

Tyson Thomas · Answer

@Henry Perez Thanks for the info. We thought we found the right partner. They are a regional credit union that holds a large portion of mortgages in house. They have been great to work with but not borrowing on investment property is a big thing we overlooked. We will be looking for other partners in the near future.

Tyson Thomas · Answer

@Mike Day You are correct. We refinanced 3 mos ago thinking we would stay here and leverage the HELOC for a while. The wife got the itch and we decided to jump on a different opportunity. The bank knows about the investment prop change because we are using them for financing on the new one. Looks like we will probably need to ride this out for a year or so and then look at refi again with a lender that will borrow on investment property.

Henry Perez · Answer

Hi @Tyson Thomas to piggyback on @Mike Day's comment, definitely reach out to all of the banks in your surrounding area (large, medium, small, credit unions, etc.). You will definitely come across a bank that offers HELOCs on investment properties. Two local banks I use offer HELOCs on investment properties so I have those ready to go if I come across a great opportunity and can use the HLEC as a down payment.

$60k in equity in my rental...what to do next?

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