Are HELOCs Drying Up?

[Christopher Stacy]

Folks, I am ready to start working on my next deal. I have two realtors that have setup an automatic MLS search, I have been scouring the internet sites and I even started networking with some like minded investors in the area. I have a sizable down payment, my credit score is over 800 and I am ready to pull the trigger on the next investment property. I have been running the numbers for the particular area and I am fairly confident that I can recognize a good deal when I see it. I can go the traditional mortgage route or position myself to be more aggressive. In this environment, I believe that an all cash offer can go a long way in negotiating terms, but I can't seem to find a lender that is providing HELOCS. I have tried USAA, Bank of America, Discover and Third Federal. All have informed me that they are not doing HELOCs on investment properties. I really do not want to go the hard money route, because I am doing buy and hold, so I am looking for options. I would appreciate it if you all can share your thoughts and insights. Thanks!

[Perry Farella]

Christopher,
Just to add an alternative you may not know is around, there are conventional buy and hold or fix/flip rehab purchase loans available for Investors.
They require a minimum 15% down payment, based on total of purchase price + rehab dollars needed. No prepayment penalty, rates based on personal credit scores, these loan are not commercial and not done for LLCs, just done for individuals.
One is called Freddie Mac Choice Renovation and other is Fannie Mae HomeStyle renovation. I have details on how they work for Investors in my blog and if you look there is blog comparing them to hard Money from a couple years ago. Always happy to answer questions.

Example: Buy at 100,000 and add in 50,000 for rehab plus a required 10% emergency reserve off the rehab budget or 5000 in this example = 155,000 total transaction. Then minimum 15% down is 23,250. This fully funds the rehab/purchase and gives an extra 10% cushion if needed, if never used it is subtracted from final loan size at completion.
An option that may work for some in the right circumstances, especially a buy & hold but fix & flip works too. You have the security of a low rate loan amortized for 30 years and can sell or rent as needed with no pressure from a Hard Money lender to repay quickly and no experience needed in rehabbing with the lenders oversight. Appraisal is done prior to loan approval to be sure all the numbers work and future rent is projected automatically and you get 75% of that monthly rent as extra income to qualify for the loan size needed.