Hi there! I have an opportunity to buy a STR (my 2nd) that I do not want to pass up. From my experience with my current STR, I am more than confident that I cannot pass up this deal but I'm struggling with figuring out the best way to finance it. Below are the details. I'm hoping those of you who are experts in creative financing can give me some ideas! :-)
- The builder hasn't decided on a price yet but my guess is it will be between 800-900k.
- My credit is 770+
- I can qualify for about 615k with a conventional loan, I have about 80k cash to use as well.
- I've leveraged 45k of equity in my primary home to purchase the first property (HELOC). The equity in my house has since gone up, so I could refinance the HELOC and get more money from there. I'm not sure how much, though.
- I also have probably about 200K in equity in my first STR, but from what I understand, it's difficult to get a HELOC on a 2nd home. Am I wrong with that?
Ok, that's it, I think. Let's hear your creative ideas! :-)
@Stacy Parkelj - Where exactly are you that a short-term rental costs $800k and how big is it lol - The return must be huge.
I'd suggest finding a money partner. If it's a good deal you shouldn't have a lot of problems finding someone.
A HELOC on an investment property is more difficult to find than one on an owner occupied property. However, they can be done. PenFed will do one with the conditions you mention, and they don't do them if you have over 4 properties mortgages. TD Bank also does HELOCs on investment properties. Lastly, your best opportunity is a small local-to-the-property community bank or credit union. Rates and terms are all over the place, as there is more freedom for the lenders to vary the repayment term, the interest rate, whether you can do interest only and whether that is 10 years or 15.
As an aside, there is also a 30 year HELOC type of product that is for high FICO individuals, and is a first position mortgage. Caeli Ridge, of Ridge Lending, offers that product called the All in One. I have used her for refinancing, but not for that product.
Thanks Kerry! Super helpful info. Jonathan, a drive-up market for DFW area. That's the going price for 2000sq ft new builds (this one has a killer view too). The average gross rev for this size is about $150+/-/yr. It's a good ROI. ;-)