HELOC and Home Equity Loan???

[Johnny Situ]

Hi BP folks, Did anyone ever try to use HELOC or home equity loan to finance their buy and hold properties? I am thinking about pulling out equity from my primary residence, I am wondering if this is kind of too aggressive.

[Frank Chin]

Yes, but banks that extend mortgages have issues with it.

I had a $120K HELOC, and only needed $20K of it to put a 10% down payment on a bank foreclosure I was purchasing. They insisted on seeing seasoned cash for the down payment. It just so happened my wife helped her mom with banking and had a joint account for about 20 years, so we showed them the passbook and it's a go.

Now, it only means that you show them seasoned cash. But when I went to the closing, the funds I used still came from the HELOC. The HELOC had a checkbook and I thought of bringing it to closing. But I decided to transfer the funds to my regular checking instead. A friend at work worked out a deal with a friend that he borrowed $10K to put into an account that he can show seasoned cash if anyone asks. In my case, they told me the funds had to be there at least 6 months. Now this guy who borrowed the $10K to show worked out a cover story with his friend that it's payment for a loan because they sometimes asks where it came from if recent.

When I had the problem, I thought of taking money from the HELOC and put it into a bank for a while in case someone wants to see seasoned cash for future investing. But I did well enough with cash flow from rents that I didn't have to do that. In NYC, I don't have to segregate tenant deposits, and with a dozen tenants, that alone gives me enough money to show, and no bank have asked me where I keep my tenant deposits.