HELOC on Investment property?

[Nicholas Fulop]

Hi,

Does anyone know if it would be possible to close on an investment property with the 25% down bank minimum and then immediately take out a HELOC separately and dip below the original minimum threshold to make repairs? Thank you!

nick

[Zach Taylor]

@Nicholas Fulop You would need to get a great deal on the property such that when you go and get the HELOC you have built-in equity to leverage. For instance you put 25% down on a property purchased at $100k. You go to get a HELOC, and that lender appraises the property at $100k. They will loan on 75% LTV on that appraised value. Well that means they could loan you $75k, but they subtract what you owe on your first mortgage, which is $75k. So there is no available equity to leverage in that scenario. But if you bought the house for $50k and then your HELOC lender appraises it for $100k, then there is much more meat on the bone for you to leverage. Hope that helps.