Canton, GA · Member since 2017 · 9 posts · 0 votes
What rules/restrictions are there regarding the use of a HELOC for the down payment of an investment property? What if I where to find a SFH that's a viable "read to go" long term rental (no BRRRR strategy required), can I use HELOC funds for the down payment when I approach a traditional lender to finance the deal?
Assumptions: HELOC on primary residence, excellent credit, full time employment, 20% down (HELOC funds), 80% balance in a 30yr fixed.
@Frank Costa I can tell you, this has been in my wheelhouse for sure! I have used my primary home since 2002 and have increased my interest only line of credit MANY times over the years. I also had HELOCs on many non owner occupied with B of A before they wiped them out in the 2009-2010 crisis. What I can tell you is that some will say this is risky, but its been the cheapest money I can get my hands on. Some investors will say, never use or risk your own home, but I think every investment has some risk to it. Other investors will say to leverage every penny into real estate and using your HELOC is smart.
I have used my HELOC to pay cash for fixer properties countless times and using the same money over and over again. I also have used it to buy into a 72 unit with a 15% ownership, costing me $202,500 of the down payment. I then sold off some older triplexes to pay this off, and increased my cash flow.
This last year, I bought a 5 plex and a 8 plex 50/50 with my older son and I used 100% of the down payments from my personal residence HELOC, and the lender fully understood what I was doing. It happened to be MAPS Credit Union in Oregon, so my purchase was in a sense 100% borrowed money, or NO money down. I also bought 3 different 4 plex units, all of which were fun down, using these funds. My down payments and all rehab were 100% HELOC funds. I have created lots of cash flow and massive appreciated values in these run down buildings.
I obtained this HELOC out two years ago from KeyBank with their 90% LTV at prime minus .25% for a 15 year draw period. It was the best I could find out there. Again, for most of these years, I used Bank of America until they made a West Coast decision back when in the bad economy and I will never use them again.
I have made a lot of money in the last 15 years using my HELOC, which was only $60,000 to start out with. Today, its $421,000. These are just my thoughts and some would disagree with me, but I didn't know any other way to make the bold moves which have made me money time and time again. My intention is to refi when rates look attract on the 4 units or less. The bigger commercial are already set in motion with a different structure.
I hope this helps, but the key if buying a dollar for .60 cents which many say is impossible to do. I would disagree, it just takes a lot of work to find them. If you buy right, the cash flow helps in doing 100% financed deals out of the gate! Hope this helps!
@Frank Costa I can tell you, this has been in my wheelhouse for sure! I have used my primary home since 2002 and have increased my interest only line of credit MANY times over the years. I also had HELOCs on many non owner occupied with B of A before they wiped them out in the 2009-2010 crisis. What I can tell you is that some will say this is risky, but its been the cheapest money I can get my hands on. Some investors will say, never use or risk your own home, but I think every investment has some risk to it. Other investors will say to leverage every penny into real estate and using your HELOC is smart.
I have used my HELOC to pay cash for fixer properties countless times and using the same money over and over again. I also have used it to buy into a 72 unit with a 15% ownership, costing me $202,500 of the down payment. I then sold off some older triplexes to pay this off, and increased my cash flow.
This last year, I bought a 5 plex and a 8 plex 50/50 with my older son and I used 100% of the down payments from my personal residence HELOC, and the lender fully understood what I was doing. It happened to be MAPS Credit Union in Oregon, so my purchase was in a sense 100% borrowed money, or NO money down. I also bought 3 different 4 plex units, all of which were fun down, using these funds. My down payments and all rehab were 100% HELOC funds. I have created lots of cash flow and massive appreciated values in these run down buildings.
I obtained this HELOC out two years ago from KeyBank with their 90% LTV at prime minus .25% for a 15 year draw period. It was the best I could find out there. Again, for most of these years, I used Bank of America until they made a West Coast decision back when in the bad economy and I will never use them again.
I have made a lot of money in the last 15 years using my HELOC, which was only $60,000 to start out with. Today, its $421,000. These are just my thoughts and some would disagree with me, but I didn't know any other way to make the bold moves which have made me money time and time again. My intention is to refi when rates look attract on the 4 units or less. The bigger commercial are already set in motion with a different structure.
I hope this helps, but the key if buying a dollar for .60 cents which many say is impossible to do. I would disagree, it just takes a lot of work to find them. If you buy right, the cash flow helps in doing 100% financed deals out of the gate! Hope this helps!
@Sam Shueh and @Dawn Brenengen are absolutely correct! I forgot to mention I had a great W2 job, now DTI, and a 840 beacon. The lender will absolutely look at the entire picture for sure! They did not care about me using my HELOC, and my son has done the same thing several times to acquire deals up in the Portland, Or area.
Last thought here. My accountant told me this last tax season that Trump and tax laws had changed. I had to identify where the $421,000 was spent into each deal IF I wanted to lock those funds and write off the interest. In the past, it was a little easier, but now it was tougher. I was easy as I knew which deal had each amount of money accounted for.
Also, I secured $225,000 interest only with my local bank, Citizen Bank in Corvallis, Or, on my non owner occupied 4 plex near OSU. I will tell you that this rate is 1.5% higher than my personal house, but I have used this to flip. Create profits and churn the same dollars and pay only as you use the funds. I did a flip this summer and two wholesale flips, as I pay down this monster HELOC. The deals are harder to find on SFH's right now, but I feel we have only one more year of decent RE environment before this cools down in 2020. Again, just my thoughts.
All the above comments are correct. Private lenders and HML will take heloc funds for down payment and often don't look at your income or personal dti. Some have medium to long term loans at reasonable rates. After you get a rental history at the property you could refi into conventional, that is another tool if your dti or w2 income becomes a problem.