Bought my 1st SFH,How can I get the ball rolling for the next on

4 Replies

Hi all, how soon can I buy a new property with HELOC? I recently bought a SFH for investment purposes in the Bay area for ~600k with 20% down. Right now it's being occupied by a tenant, breaking even on the mortgage and property tax.


I want to start looking into multifamilies next out of state. 

How soon can I tap into my loan and get a HELOC going? how much do I need to save on the side to have the bank seriously consider me again? I want to get going and not waste time. Any advice on how I can make getting my next property soon? I have a good credit score and income.

I am reading Long Distance Investing by David Green as well. Thank you 

Typical HELOC lender will lend up to 90% LTV. So, you should have the potential to get a $60k HELOC right now. However, getting a HELOC can be tricky on investment properties, so you may have to shop around to many different banks.

When it comes to acquiring another loan, there are many different ways to determine if a bank will approve you. First, if you're purchasing over 4 units, then this will be considered a commercial loan and the cash flow which the property produces is the main factor in obtaining financing. 

For less than 4 units and slightly for larger multifamily, the bank will mainly look at your debt to income ratio (DTI) to determine if you are qualified for financing. The lower your DTI the easier it'll be to obtain financing. Most banks look for somewhere at or below a 40% DTI.

Hope this helps. Where are you looking to invest out of state? 

You're going to need to talk to a few lenders and find which ones will actually do HELOC on an investment property. Many won't. Once you find someone willing to work with you, as long as you are doing investment loans and you qualify, you can theoretically buy as many as you want. There is no limit to the number of mortgages you can get in a year as long as you have the income to back it. Keep in mind your first year, rents will likely not be considered income and the mortgage payments will go towards your DTI.

@Emma Chen If you are doing this on the strength of your income alone(without partners) you will need a seriously high W2 income to get another loan. Even though SFR's are still going up in price, I seriously doubt that you have gained that much appreciation equity to make it worth the effort for you or the lenders. Even if you got in way under market and the property were to appraise substantially higher, it will take you at least a year of "seasoning" before your DTI comes back into alignment. Basically, you raised your debt level to buy the property, but banks will not use your rental income for the first year in calculating your DTI so your income will look low. There might be a bank that will pull that back to 6 months if you have a really good relationship but don't count on it. Maybe I am being too conservative, but I think you need to address the DTI issue before they will lend to you, even on a HELOC. Sorry to be throwing cold water on your flame. I do wish you the best of luck!

-Arlen

@Kendall Staggs - Awesome! thank you. I'm still quite new to this, and going to do my research, but I had visited St. Louis twice now and I really like the city. Also, I've considered Texas, the suburbs, maybe even Laredo by the border of Mexico (read a book about people living there and it was pretty interesting, plus I really like traveling to Mexico)...  I am open to suggestions. Would like a city where it has much potential for growth, positive cash flow,where the eviction laws are not so stringent, and lower property taxes. I will read into the commercial loan

@Sarah Brown - Thanks!! That's reassuring to know you can have more loans if qualified. 

@Arlen Chou -After using a DTI calculator with the mortgage (I have no other debts and doing it alone) it puts my ratio to 26%, so I think I will still do some more research as well. That's what I was thinking too in regards to obtaining another loan, where I may have to wait a bit. My goal is to have a multifamily (6 units+) out of state by August 2021. Thank you for the insight