HELOC on income producing property

Investor · San Antonio Tx · Member since 2023 · 9 posts · 3 votes

I trust this email finds you all well. I am a property owner in San Antonio, TX, with an income-producing Airbnb that has demonstrated exceptional performance for over a year. I am interested in exploring the possibility of a HELOC against this property to facilitate the purchase of a warrantable condo in Gulf Shores, AL.

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

If you find a HELOC / 2nd position mortgage provider with rates lower than 10% up to a reasonable LTV on an investment property, let me know and we will explore potentially making the lender very notable.

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Patrick BlackRock
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Investor · San Antonio Tx · Member since 2023 · 9 posts · 3 votes
3y
Quote from @Matthew Drouin:

@Patrick BlackRock
Do you still technically claim it as your primary residence?
If so you could qualify for an owner occupied HELOC with a local credit union.

Yes, I still claim it as my primary residence, I applied with a local credit union and they as something about "excessive obligation to current income" and refused to apply my overtime from w2 and income from the STR. I need to tap into my equity to do another deal.
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
3y
Quote from @John M.:

TD bank offers lines of credits on rentals, but the rate is about 7.5% so I only use it for short term needs or deals that pay above an 8.5% cap to cover the spread.
My HELOC rate on my primary is 7.49% and it was 2.29% in 2021.
if the rate on investment HELOC would be 7.5% - I’d open that HELIC instead of selling the house. No bank will even give me cash out refi on totally free and clear rental with $150K value
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 801 votes
3y
TD bank has rates at 7.5% depending on how much you take out on the Heloc.
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Brittany MinocchiBusiness Member
Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
3y
Quote from @Irina Belkofer:

Quote from @John M.:

TD bank offers lines of credits on rentals, but the rate is about 7.5% so I only use it for short term needs or deals that pay above an 8.5% cap to cover the spread.
My HELOC rate on my primary is 7.49% and it was 2.29% in 2021.
if the rate on investment HELOC would be 7.5% - I’d open that HELIC instead of selling the house. No bank will even give me cash out refi on totally free and clear rental with $150K value
Why can’t you cash out?
[email protected]330-354-6590
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
3y
@Brittany Minocchi banks don’t really want to and rates are around 9-10%.
I won’t refinance in couple years because I’m moving to another state - so all my houses will be sold anyway.
I asked my mortgage broker about cash out refi %%? and got vague answer….right now I’ve max out all my credit cards with 0% so next time I’ll be looking for cash out refi is in June 2024 - my score dropped below 700.
When it’s back to 800+ I’m going to buy my next home so I guess it’s not in my stars to do it…..however, I know people who are selling their rentals rather than get cash out of it - and mostly it’s because it’s hard to find a good lender to work with

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Brittany MinocchiBusiness Member
Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
3y
Quote from @Irina Belkofer:

@Brittany Minocchi banks don’t really want to and rates are around 9-10%.
I won’t refinance in couple years because I’m moving to another state - so all my houses will be sold anyway.
I asked my mortgage broker about cash out refi %%? and got vague answer….right now I’ve max out all my credit cards with 0% so next time I’ll be looking for cash out refi is in June 2024 - my score dropped below 700.
When it’s back to 800+ I’m going to buy my next home so I guess it’s not in my stars to do it…..however, I know people who are selling their rentals rather than get cash out of it - and mostly it’s because it’s hard to find a good lender to work with

I'm assuming you're talking about a DSCR, in which case you're correct, rates on those cash outs are often in the mid 8-mid 9s right now. The property is in OH? If so, that's not doing you any favors either. We usually have to buy out the PPP which increases your rate, and they aren't permitted if the loan amount is below a certain threshold. If your property is worth $150k, at 75% LTV that would be considered a low loan amount for a DSCR. Doable, but not the best rate or terms. 70-75% LTV is pretty typical on DSCRs.
[email protected]330-354-6590
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
3y
@Brittany Minocchi I don't do DSCR - I have access to better rates and don't need that high closing cost - I'll need to keep this property for 5-7 years to break even.

I was talking to my broker about conventional loan for investment property.

It was easy to close in 2019 but not now. My rate was 4.125% with $4K total closing costs including title etc. Their origination fees was about $1400 which is really nice and no points.

Once I get back to 800 FICO with DTI close to 5-10%, I'll try to buy my next home.

As for the mortgage amount, it was $88K - down 20% and price of the house was $110K.

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Brittany MinocchiBusiness Member
Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
3y
Quote from @Irina Belkofer:

@Brittany Minocchi I don't do DSCR - I have access to better rates and don't need that high closing cost - I'll need to keep this property for 5-7 years to break even.

I was talking to my broker about conventional loan for investment property.

It was easy to close in 2019 but not now. My rate was 4.125% with $4K total closing costs including title etc. Their origination fees was about $1400 which is really nice and no points.

Once I get back to 800 FICO with DTI close to 5-10%, I'll try to buy my next home.

As for the mortgage amount, it was $88K - down 20% and price of the house was $110K.

Lenders aren't crazy about low loan amounts (they usually have a pricing adjustment) but that's not to say they won't do them, especially in our area. I assumed it was DSCR because of the rate you mentioned - 9-10% is high for conventional. I'm seeing par in the low 8s on SFH investment cash outs.
[email protected]330-354-6590
Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
3y
@Brittany Minocchi my client closed last November conventional on his primary residence with 7.25%…for investment it is always couple %% higher.
When I got 4.125% in November 2021, my primary residence rate was 2.29%.
Besides, cash out refi always higher than buying the rental
I was a loan officer 17 years ago and back then everyone could get a loan…now banks are afraid….and I don’t blame them
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Craig Jones
Member since 2023 · 113 posts · 129 votes
3y
One more:
America First Credit Union (UT, ID, OR, NM, AZ, NV) does HELOCs on investment properties up to 80% CLTV. They quoted me 10.49% current rate.
2 Reply
Muhammad Patel
Member since 2022 · 15 posts · 4 votes
3y
Quote from @Irina Belkofer:

@Brittany Minocchi banks don’t really want to and rates are around 9-10%.
I won’t refinance in couple years because I’m moving to another state - so all my houses will be sold anyway.
I asked my mortgage broker about cash out refi %%? and got vague answer….right now I’ve max out all my credit cards with 0% so next time I’ll be looking for cash out refi is in June 2024 - my score dropped below 700.
When it’s back to 800+ I’m going to buy my next home so I guess it’s not in my stars to do it…..however, I know people who are selling their rentals rather than get cash out of it - and mostly it’s because it’s hard to find a good lender to work with

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Muhammad Patel
Member since 2022 · 15 posts · 4 votes
3y
Quote from @Irina Belkofer:

@Brittany Minocchi I don't do DSCR - I have access to better rates and don't need that high closing cost - I'll need to keep this property for 5-7 years to break even.

I was talking to my broker about conventional loan for investment property.

It was easy to close in 2019 but not now. My rate was 4.125% with $4K total closing costs including title etc. Their origination fees was about $1400 which is really nice and no points.

Once I get back to 800 FICO with DTI close to 5-10%, I'll try to buy my next home.

As for the mortgage amount, it was $88K - down 20% and price of the house was $110K.

The rates you are giving, are they for conventional cash out refinance. The shortest way to increase you score is to do a cash out refinance and payoff your credit cards. This will increase your score to over 800 that you are looking for. Try doing a conventional cash out refinance. The rates are not horrible ( they are if compared to 2 years back ). Cash out refinance on DSCR will cost you more .
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
3y
@Muhammad Patel yes, I’m teaching people how to improve their credit so they could buy a house.
I’m investing money I’ve taken from credit cards with 0% for a year and my score don’t improve until I pay them off - before June 2024.
I can’t get 0% on any refi loan so I’ll wait. My score was 820 in July and will be again next July
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