New LLC seeking business LOC on privately owned property

[Paul Brady]

I have 2 investment properties that both make money and have equity but lenders still see my dti as too high to get another mortgage or a heloc. I'd like to buy another investment property but need more capital for the 20-25% down payment. My question is if I were to start an LLC could I take out a secured business line of credit on my 2 family that is in my name? Then use that money to purchase an investment property through the LLC?

[Alex Breshears]

Hi Paul! Another option may be a private lender that is willing to cross collateralize the next purchase with an existing property that has the equity there. The existing equity needs to be below about 75% LTV in order for this option to work. For example, if one of the two properties you own is at 40% LTV, then a truly private lender could come in and put a lien as a second on that property and a lien on the newly acquired property and count that equity in the existing property as the downpayment. That saves you as the borrower the fees of closing two different loans, as it's all done in one transaction as if it were one property. We do this in WA state frequently to help invests purchase an additional property by tapping equity in an existing property. Just keep in mind because there is equity there doesn't mean it is all useable. Having a property at 80%+ LTV is not likely going to be a candidate for this process, unless it is a high value property and the actual 5% or 10% of the value is substantial enough in dollars to make the deal work (so having a $1M property, 10% equity is $100k in cash). Again, those high LTV loans are rare, but just explaining how a private lender may look at the deal.