HELOC or Cash Out Refinance Hampton Roads

[Quinton Singleton]

Hello everyone,

I'm a local investor in the Hampton Roads, Virginia area. I purchased a property last year in Norfolk that was in pre-foreclosure and needed some minor cosmetic fixes. The appraisal came in well above closing price and I have operated it as an Airbnb for the last 18 months. It has done extremely well despite COVID. Using comps in the area to get an idea of equity in the property, I now have roughly 80-90k. I would like to tap into this equity to help fund future deals, however, every institution I contact has put a hold on cash out refinances. I'm using this post in hopes of finding recommendations for a bank or mortgage company that either offers a cash out refi or HELOC on investment properties during these times. If anyone knows of a bank that does first lien position HELOCs I would greatly appreciate that as well. Thanks ahead of time for the assistance.

[Patti Robertson]

I know you won't love this recommendation, but if I were you guys, I would just sit tight on that equity position right now. Hampton Roads market is exploding and prices are ridiculous.  Unless you are flush with cash, it's not the time to be buying investment property.  Prices are so high hardly anything is cash flowing once you add in operating expenses and reserves. We only have 1.5 months of inventory on the market right now. If things don't loosen up the market will get even crazier. In a really strong seller's market, banks are going to be more trigger happy with foreclosures, which will give us a little spring back to free up some inventory. This should also soften prices a little bit.  Just be patient and eventually the market will turn some.  

If you just can't wait, you could explore moving to a blanket commercial loan instead.  Local banks and credit unions will still lend on an equity position, but expect them to want you to keep 25% equity free.  Your new purchase won't likely have any equity, so you will most likely need to have enough in your other properties to bring the average down to 25%.

Personally I am selling thinks I don't really love and buying only if I find something off market. I'd rather wait the market out than compromise my cashflow and equity position.

Just my two cents from an experienced investor who has lived through the market shifts.