Real Estate Investor · Chicago, IL · Member since 2017 · 29 posts · 11 votes
Hi everyone new to bigger pockets and hoping I can find some help.
I'm a young guy just starting to invest and in my mind I have a few options but don't know what the best way to go is for long term investing.
I've got a 3 unit in chicago right now that's an fha loan that has 25% equity in it today. Then I have 4 single family homes in Indiana three of which I own free and clear.
I want to purchase more but don't know if I should cash out refinance the 3 SFH's or get a line of credit on them.
Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
9y
Line of credit is a variable rate. You have the ability to pull the money/principal out again after you've paid it down. So if the intention is to pull money in and out over time, kind of like a credit card, and you're ok with rate fluctuation, the HELOC is the choice.
However, if you are thinking more long-term, want a fixed rate, and you can take specific dollar amounts and put them in play in the near future, a cash-out refinance on one or several homes is the way to go. Make sense?
Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
9y
Line of credit is a variable rate. You have the ability to pull the money/principal out again after you've paid it down. So if the intention is to pull money in and out over time, kind of like a credit card, and you're ok with rate fluctuation, the HELOC is the choice.
However, if you are thinking more long-term, want a fixed rate, and you can take specific dollar amounts and put them in play in the near future, a cash-out refinance on one or several homes is the way to go. Make sense?
Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
9y
@Account Closed
Credit line has it's advantages in some case - You can pay it down when not using the cash. On the other hand it needs to be renewed each year.
Cash out refi's may make more sense in this case. If you have multiple properties you can move them to a LLC and then get a commercial refi or if you want residential refi then do the refi and then park them in an LLC for long term.
Real Estate Agent · San Diego, CA · Member since 2015 · 293 posts · 109 votes
9y
It may be hard to find a lender that will do a HELOC for your LLC. That is the hurdle we are tackling right now.
I've talked with close to 15 different lenders before finding one that will give our LLC a HELOC. 10 year draw period with interest only payments at prime+1%, 20 year repayment with 60% LTV.
It took some work to find, but we are glad we kept calling as many lenders as we did. Personally, I like the idea of using a HELOC instead of the cash out refi - just fits our plan better right now.
Good luck with your decision.
Real Estate Investor · Chicago, IL · Member since 2017 · 29 posts · 11 votes
9y
Andrew Holmes
So are you saying I can do a resedential fefi and quitclaim deed them into the LLC? For the commercial refi that would end up being some sort of arm or balloon loan correct?
Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
9y
@Account Closed
Yes you can do a residental refi and then quitclaim to a LLC.
Commercial refi's would end up being a 5 year balloons.
There is another product out there where on a commercial loan they will give you 30 year fixed but the rates are at 7%. No need to go there yet in your case. You have other options.