Using Equity Line of Credit for more REI?

Question

Here is my situation:

I live in northern CA. I own 3 properties and live in 1 of them.

Property 1: value $1.1M, debt = $700K

Property 2: value $750K, debt = $400K

Property 3: value $500K, debt = $330K

I don't want to use the emergency cash on my savings, but I currently contemplate getting HELOC to invest in REI.

Assuming the HELOC are for 85% LTV, the line of credit would be close to $500K.

Is it recommended to use HELOC for REI? Can anyone share their experience?

Dennis Tierney · Answer

I have used a HELOC to help purchase an investment property, however, we had no mortgage and the HELOC was for only 33% of the home value. I think of it as just transferring equity from the home to the investment. We have a good rate of 4.5% interest only, but, paid it off in a little over a year. We'll not hesitate to use it again if the right property comes along.

Michael Murray · Answer

There are a few options;

1 Commercial lender.

2 Pledged assets

The issue is the LTV is will be 80% for HELOC and Pledged Assets.

Equity lines are 90% LTV. Weigh the cost of money into your ROI and it might not be worth the deal.

Frank M. · Answer

I agree with Andy, talk to the banks and see what they will do, you may have a couple refinances ahead of you.

I am using a HELOC for my first purchase of my second attempt at investing in RE. Using the HELOC allowed to make a few 'cash' offers to sellers I thought might be motivated to move quickly and one bit. After it's rented, I'll wait to show a few months of the rent coming in, and get a conventional loan.

Even if you don't use the HELOC, it's good to have the access to a chunk of cash to give you flexibility.

Sharon Tzib · Answer

A private lender who will loan you the funds for the investment using a blanket mortgage to cross collaterize your properties would be an excellent option for you.

Andy Collins · Answer

I am not even sure you can get a HELOC on an investment property, you can on your personal residence,,but I don't think they are for investment property.  If you can, I would really question being able to get up to 85%, since most mortgages are only for 75% on investor properties.

In Texas we can't even get a HELOC on our residence for more than 80% (state law, until not that many years ago HELOC's weren't even allowed in Texas)

Franklin Romine · Answer

I'm not sure where you will find a line of credit product you can cross collaterlize on 3 properties.  You might be better off to refinance one or a couple of the properties to pull out equity.  I have a couple lines of credit but they are first position lien.   My rates are 70% LTV 7% interest.  If you have good credit you might beable to get a unsecured line of credit.  Which I have done and keep for emergency or opportunity.

Brant Richardson · Answer

It's very common for investing.  I usually think of it more for short term financing like a flip or to buy an undervalued property with the plan to refinance later.  I have personally never use one.  I'm sure someone else will chime in.

Using Equity Line of Credit for more REI?

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