90% LTV HELOC on investment property

[Evan Staats]

In the north east/mid east area. Looking to see if anyone has any good recommendations on lenders that will provide 90% LTV HELOC on an investment property. Also allowing that HELOC to be used for a dp on a STR.

Just got through the process with a lender and they miscalculated the HELOC amount due to the fact it was an investment property and not a primary residence.

thank you!

[Alex Breshears]

Hi Evan! 

As others have mentioned the 90% CLTV on an investment property doesn't exist in this lending environment right now. But I also wanted to offer some insight into the thought process and why this may not be the best option.

First, being overleveraged in one property to then buy another property (and potentially keeping this train going with the same business plan) can be building a house of cards for real estate. This situation is what helped take down the 2008 housing market with not only over leveraged properties, but also loose relatively free monetary policy. I think using this as your primary source of capital for a new property can overall be problematic in the current environment, especially on an STR property.

When you borrow from one property to fuel another purchase, if that 2nd property falters, you are also covering the costs on the first property. You are creating a case where the first domino falls, it takes down the rest. STR's in particular are facing lending challenges because lenders are seeing the headwind in the economy with record high inflation, increasingly regulations around these properties, and saturation happening in several markets. STR income can be highly variable, so unless you have the reserves for carrying costs when occupancy dips, I wouldn't recommend this strategy right now, especially if you are looking at a property in a leisure travel market. Inflation eats away at discretionary income, and leisure travel is usually the first thing cut from the list of expenses.

Other options might be using the cash flow from property 1 to save up for property 2, or looking at other ways of acquiring real estate other than 1 person on title for 1 property. There are a whole ton of options out there so don't pigeon hole yourself into one way and not consider other possibilities.