HELOC on second property?

Question

Hi, I am an interior designer who has successfully flipped a few homes in the Dallas area.  I have been on HGTV and hosted my own online show called Homergency.  I am also a real estate investor who has a few commercial and residential properties in both Dallas and Toronto, Canada.

Since I have discovered BP, I have been really impressed with all the information shared.  I love listening to the Podcasts and reading the blogs.

I am looking to expand into multi family units.  Can someone help me with this?  Do you know if any of the local banks/trust companies offer HELOC (home equity line of credit) on rental properties?

I can also help other investors with design and selecting materials that are cost effective but still look beautiful and appeal to the masses.

Thank you!

Leland Barrow · Answer

HELOC is not really the correct terminology. A LOC is better understood by banks. If you tell them you need a secured line of credit against an investment property you will probably get told "no" less. Most lenders will not do a LOC because it puts them in a 2nd position on an investment property. They see it as increased risk with no benefit. However, you can call whoever is in the 1st position and request a LOC against the property. You will have more success this way as they have no additional risk with greater benefits to them.

Mark S. · Answer

Hi @Annabelle Lee I am a mortgage loan officer in Texas, I can help you with your refinance.  I will send you a PM. Thx

Annabelle Lee · Answer

Hello @Jany Lee and @Mark S., I am looking for a company to refinance in Texas.

Mark S. · Answer

hi @Annabelle Lee and @Jany Lee one of my old classmates from McGill is a mortgage loan officer in Toronto. If you are interested I can connect you. Thx!

Jany Lee · Answer

@Annabelle Lee are you looking for mortgage companies here in Dallas or Toronto?  I haven't done any cash out refinance with my Canadian properties and I am still working on getting the cash out refi on my Dallas properties.

Annabelle Lee · Answer

@Jany Lee, can you share the mortgage company that will do cashout refinance?

Michael Lee · Answer

Hello again!  I believe in what Mark said.  If your budget will allow for it, that's great.  I see that you found that a HELOC was not available in Texas for your use but it might be changing.  I hope that you have built a good relationship with the owner.  He or she might be able to help you with their financing.  They might loan you the down payment money if you can convince them that is the way to go and get a sale.  Loans seem to be very available right now.  Best wishes!

Mark S. · Answer

@Leland Barrow are you talking about credit unions and smaller banks?  The only way the bank would have the kind of discretion regarding the loan is if they held it in house as a portfolio loan.  If the loan is going to be resold on the secondary market the bank will have to comply with the investor guidelines for the loan.

I agree with what you are saying regarding the ability of smaller banks to work with their customers though.  Portfolio loans can be much more flexible and easier to qualify for, although the rates tend to be higher and you have to be local.  Some local banks will also give you an LOC with a higher draw amount than the value of the portfolio, it just depends on your relationship with the against the portfolio which can be greater than the assets you have in the portfolio.

Have you found any good local banks to work with in TX.  My favorite so far has been TX CU.

Mark S. · Answer

@Jany Lee you should be able to do a cash out refinance for the investment properties.  That being said the amount of money you will be able to pull out can be limited by the guidelines for the loan.  As @Tom V. mentioned many banks will offer them but there are additional restrictions in Texas and with different loan programs.

@Michael Lee mentioned HELOCs are a last resort for his investment strategy.  That is a critical distinction to me, you always need to make sure your financing fits your strategy; always be careful when leveraging your money.  That being said, I think HELOCs provide great short term financing which can be used quickly to make "cash" purchases you can later refinance.  Your financing should be strategic based on your goals and what will work best, as always it is best to speak to a professional to make sure you are making the right moves.

Jany Lee · Answer

Thank you everyone for your suggestions and help.  I spoke to a few banks and they said that Texas law currently doesn't allow for HELOC on second properties.  One bank mentioned that Texas may be changing this law in the future but as of now we can't.  I found a mortgage company that will do a cashout refi on the rental property.  It sounds like this could be an option but I am still looking into all the final details.  Smaller banks and credit unions seem to have more flexibility when it comes to these options.

HELOC on second property?

Most Popular Reply