All Forum Posts by: Kerry Baird

My experience is that it is possible, but more expensive and difficult to find, a HELOC on an investment property. In your position, I would go in to a small community bank or credit union. Pull your own FICO score so they have a starting point for rates without them pulling your credit and creating an inquiry. Ask about loan programs they have that might be suitable for your situation. Additionally, you might have other resource you are not thinking about, such as borrowing against your 401k or similar.

My current thoughts in my own situation go like this: if I sell or refinance this one property can I buy 3 or 4 others with the equity?  Once we have a handful of properties, we use the debt snowball to pay them off quickly, and then we borrow against them again and buy another handful of properties. And then we debt snowball those mortgages and pay them off quickly.  That is how I like to leverage equity.

@Andrew Postell is a creative thinker in this arena.  There aren’t too many options that I see; this could tip over into an ongoing negative situation.  Get your funds and do the needful things so the primary can be financed by a future buyer, or can be rented. 

There are a lot of differences, really from lender to lender. I like to use a community bank or a credit union. My favorite credit union is Navy Federal, because they offer a long draw period. Some have a fixed interest rate for a short period of time, some have a fixed period for a long time; some allow you to "lock" an amount you draw at the rates of the day (PNC). Some allow you to have a HELOC in first position, while others only want to be in second position. My advice is to pull your own credit scores so you know what your own FICO is, and ask the local (to the property) credit unions.

Last thought is that it is so much easier to get one on your primary residence vs on an investment property.  You'll want to do research on how much of the interest, if any, is deductible, because taxes also matter to me.  

I expect my Florida market will be hopping soon.  Thanks!

I'd ask my CPA. 

@Sharon Sasser, I attend one group that meets on the 2nd Wednesday of the month.  I also sometimes make it to the BREIA meetings in the back room at Hall 'n Blazes in downtown Melbourne.  And Priscilla Z. hosts a meeting in Palm Bay that is geared more towards wholesaling.  And then there is the CFRI that was mentioned earlier. 

I like to do fixers and have buy-and-hold properties, and am going to be moving out of vacation rentals.  We are somewhat recently retired military (I did 6 active and 4 reserve, hubby did 24 in the AF) and don't use the base very much.  If we lived in Satellite, we probably would get gas and use the Commissary more.  Anyway, I'd love to see you at one of these gatherings.  

I like the comments that @Dave Poeppelmeier made above.  I would have said a very similar thing. 

I like a HELOC for an emergency fund, as well. When we needed money it wasn't available due to low FICO scores from remodeling, DTI and so forth, so when we think of a possible financial pinch coming in advance, and can draw from a HELOC, that helps out a lot. I also raided my retirement fund and am pleased that I did. We are at 39 houses and counting. We will sell some of the lessor houses in the future and pay off some others.

I have not used one of those sites.  But I have used the MyFico site to improve my credit by myself, largely by paying attention to the utilization thresholds. 

My scores improve by getting utilization under 78% and then 66% followed by 48%, and finally 29%.  I made an Excel spreadsheet and color code the ones that are higher in the red or orange colors, and low balances in green. I got a big jump in my score by keeping all cards under 66%.  The goal would be to use only one card with a small balance, and use/pay any others to zero.  For highest FICO scores, aim for All Zero Except One or AZEO.  The forums at MyFico are really robust.  

The comment that @Greg Scott made is intriguing, because his experience is that those two units make a big difference in how the deal is done, from the business plan onward.  

I have bought 39 SFRs and cannot give guidance on your purchase, just a thought on the SFR side of things. I renovate when I have a turnover, and it does not disturb other tenants vs have a bunch of units down, or a bunch of tenants disturbed.

For finances, we can stay on the residential side of things with mortgages until 10 mortgages or when it gets challenging with regard to reserves, and then we used commercial mortgages which lenders expect ownership in an entity (go look into entity formation), and from that side of things we need to show income. 

In both situations we the buyer can ask for owner financing, and I do ask each time I make an offer.  A benefit to having the commercial property and entity is that we aim to utilize business credit, so that our personal credit and debt to income ratio is not tanked as we remodel or redesign or buy furniture.  (go look at business credit)

Next, some costs...really insurance...is very expensive on the commercial side (well, for STRs specifically, insurance is very pricey).  Lastly, the comment above that Scott made about business plans: I don't think we really considered business plans until we had a handful of houses. It is worth having a specific direction from the start.  The Operating Agreement becomes really important (so go learn about them, too).  

This is one of those situation where the HELOC on your primary residence would be easier to get, especially while you have excellent credit scores. Going forward with the business, aim to never use your personal credit, but aim to use business credit. My experience was getting my personal credit utilization high as I bought product for my business, and subsequently my FICO went low; therefore financing was increasingly difficult. I had to learn about business credit after the fact, and retrench. I recommend you plan for this in advance. :D