Investment HELOC vs Refi vs Commercial Loans

[Jeff B.]

Seems to be a consistent issue/question on BP attempting to drawing equity out of our investment properties. We are accustomed to HELOCs and REFIs with our own homes and naturally assume we can do the same with any SFR being operated as a rental.

1. definition of assume:- it makes an A** out of you and me.

Assumption a deadly for investors; the mantra must be verify, get a second opinion and reverify.

Both HELOCs and REFIs apply only to SFRs which are owner occupied. Your rental is not OO and therefore will never qualify. It's a rental (aka business) property and you will need a commercial loan (just like MFU 5+ properties). Save your time and effort and seek another solution.

Cash out on a rental (sfr / mfu) will need to be on a Commercial Loan basis.

The loan rate contributes very little to the mortgage payments (run different rates thru a payment calculator to see the differences), so don't go crazy on the rate.

However, all commercial loans are ARMs and get reevaluated periodically, and that may be a deal breaker. My MFU arm changes twice a year, but not by big numbers, ( never seen a $10 change yet).

[Kyle J.]

Hey @Jeff B., I agree with your point about verifying information before taking action.  Especially when it comes to the lending aspect of the business because different banks are going to have different rules and in many cases an investor's exit strategy may depend on what type of loan they can (or cannot) get.

However, just so you (and others reading this) know, it IS possible to do both conventional cash-out refis (15 or 30 yr) and HELOCs on investment (non-owner occupied) properties.  I've personally done both and neither were commercial loans. 

Do most banks do them?  No.  But you just have to be diligent and keep calling until you find one that says "yes".