Haiku, HI · Member since 2011 · 50 posts · 19 votes
Basic strategy I am contemplating is buying a SFR outright to rent out. Then take a equity line on this for 60% LTV and purchase an additonal foreclosed SFR to rent out. Then use both rental incomes to pay off the equity line.
As far as background info goes: my brother and i currently own our house with ltv of 56% and we own commercial real estate free and clear that we rent as well. I have found that equity lines are more challenging for commercial and I would hate to jeopardize the commercial property.
Currently, I only show the rental income from the commercial property on my taxes. This is why I believe the equity line might make more sense than conventional financing.
Does this sound feasible? Ultimately I would like to continue this cycle over and over again. Thoughts?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Do you mean taking out a 60% LTV loan based on the purchase price? Why not just finance from the start? If you want to use a new appraisal and get a cash out refi you should plan on holding for at least a year before your do that.
If you want a LOC on the property, best to track down that lender before you start. Those are really tough to find on investment properties.
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
13y
My philosophy is to never do a deal that jeopardizes my other deals. If you don't have the cash and can't find a private lender (you can, but probably haven't bothered to look) you shouldn't be in the deal, especially not with risky bank financing. HELOCs are adjustable and in this chaotic environment, I wouldn't want to be holding real estate with adjustable interest rates. You won't be paying off that HELOC in the next few months with the rent income that's for sure.
Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 974 posts · 488 votes
13y
The old "buy and hold" playbook is often reliant on refinancing and getting cash-out for the next deal. This is dramatically harder since 2008 than it was in the past.
I hear people say it back to how it used to be. But I don't think that is really true. 20+ years ago lenders required good credit and large down payment, but today that is not enough. The govt has created underwriting requirements whereas the banks have to prove the borrower can afford the loan, so collateralize loans are not common place at all anymore.
Anyhow, I would spend some time talking to lenders to find out what you options are. There has been major changes in the past 4 years so make sure you know what you can do before you make any plans.
Haiku, HI · Member since 2011 · 50 posts · 19 votes
13y
Thanks for the quick replies, you guys are awesome. I was unaware that HELOCs are adjustable, something I do not want to get involved with.
I have a decent amount of money to get things rolling, and I will continue looking at different ways to get the best bang for my initial investment. I realize that lending has gotten more harsh since all the unscrupulous lending. I'm sure it depends on the exact figures and weights but does anyone know how many mortgages you can have at once?
Some numbers for this analysis:
current income=1540 month
cash=90,000
credit=735-760
assets=1/2 ownership of commercial property (value:400000/2=200000) own free and clear
1/2 ownership of house (value=160000, mortgage=87000)
Currently I have one 30 year fixed mortgage with my brother on our house. I'm looking to buy as many SFRs as possible for rentals.
Looking to spend 50-75k per house
assuming rent to be 1000-1200