Investor · Bronx, NY · Member since 2016 · 78 posts · 40 votes
I just took out a HELOC to use as a down payment an investment property. My monthly payments will be low (interest only for 10 year draw period), so shouldn't really affect my debt to income ratio much.
Once I buy the investment property, can I immediately take out a HELOC on the investment home? Since I am putting down 25% and the house will appraise for more than I bought it for, the numbers should work.
And then can I do it again with the house I buy using that HELOC as downpayment? And keep doing this forever and continue to buy more properties? Or am I missing something?
@Michael M. Simple answer is Yes. You will need to find a bank that will not require you to “season” the property though. Meaning, many banks will take the purchase price instead of the appraisal price within the first year of purchase. They do so to avoid lending to customers that want to do exactly what you are doing 😁. Don’t be discouraged though. I found a small local bank in my community that is very investor friendly. They don’t require me to season the property and they’ll loan based off the purchase price + renovation costs. They’ll loan 80%
Bottom line is you can absolutely do this, you will just need to find the right bank. One other thing to note, these loans are commercial, no residential personal. The guidelines for commercial are much more Investor friendly.
This thread was super informative. I am in the process of applying for a HELOC on our primary residence to fund our first investment property.
I so want to do this but my wife is too afraid of leveraging our own house until it can be demonstrated that our REI strategy isn't going to get our house taken away. IOW, we need a proof of concept first.
I'm going to roll my IRA into a Roth Solo 401(k) and use that as my bank. When that works out with no downside hopefully we can start HELOCing. I know we can build the portfolio off the first investment, but I want to expedite our growth, and we have a fair amount of equity.
How long before I have to pay the principal back ?
Thanks so much !
Hi Julie,
US banks does it but best luck would be with smaller banks in my opinion. Usually its your first 10 years (draw period) is paying interest only on your balance. Once draw period is up, what you have left will be amortized over a 20 year period (most common) but some will say 15 years or so also. You just gotta check with your lenders terms.
This thread was super informative. I am in the process of applying for a HELOC on our primary residence to fund our first investment property.
I so want to do this but my wife is too afraid of leveraging our own house until it can be demonstrated that our REI strategy isn't going to get our house taken away. IOW, we need a proof of concept first.
I'm going to roll my IRA into a Roth Solo 401(k) and use that as my bank. When that works out with no downside hopefully we can start HELOCing. I know we can build the portfolio off the first investment, but I want to expedite our growth, and we have a fair amount of equity.
From what I have learned it must be a "Self Directed" "Non Recourse" IRA. Lots of rules. NO personal use no crossing the line between personal and business.
FYI-I contacted PENFED as I have used them in the past. They confirmed today that they no longer do HELOC on non-primary residences.
Within the last 3 months I have been told the same by BB&T/Truist, RidgeLending and most recently First Citizens.
I was able to get First Citizens to HELOC my primary. Was then told they may be able to HELOC a investment as a "business HELOC. Still a work in progress. Not much luck with HELOC on investments/non-primary.
This thread was super informative. I am in the process of applying for a HELOC on our primary residence to fund our first investment property.
I so want to do this but my wife is too afraid of leveraging our own house until it can be demonstrated that our REI strategy isn't going to get our house taken away. IOW, we need a proof of concept first.
I'm going to roll my IRA into a Roth Solo 401(k) and use that as my bank. When that works out with no downside hopefully we can start HELOCing. I know we can build the portfolio off the first investment, but I want to expedite our growth, and we have a fair amount of equity.
From what I have learned it must be a "Self Directed" "Non Recourse" IRA. Lots of rules. NO personal use no crossing the line between personal and business.
More or less. You can lend to yourself out of it, though
What would be the advantages to the HELOC over cash out refi? I get the HELOC on the primary residence where you can get 85-90% ltv but if you're limited to 70% ltv on an investment HELOC and it's going to be 3 points more interest than the primary aren't you better off finding a bank that will refi to 80% on an investment property and locking in the lower rate?
I personally would not refi right now as I have a 2.75% interest rate and refinancing would put me up to 7.25% plus thousands in closing costs so it's not cost effective, especially over a 30 year term. However, I am about to close on a HELOC and can borrow up to $100k. I have the option to pay interest only at around 8% for 10 years or I can lock it into a fixed rate at a lower %. Makes way more sense to me!