Basics of Home Equity Loans

[Nicholas Leone]

I’m about to attempt to pull out a home equity loan to fund my initial multifamily investment. For those of you who have done this before, would you mind sharing your insights on what I should expect?

Did you try to start building a relationship with lenders before you applied for the loan?

What LTV did you get on the home equity loan and how recently was this?

Did you use a local lender or a larger national lender? I would think that you’d want to find a local lender.

Once you got approved for the home equity loan, did you get the cash immediately or did the lender want you to identify your investment first?

Did your lender require you to hold any reserve accounts at the bank?

In identifying an investment property, what spread were you looking for? If you borrowed at 6%, were you looking for an 8% return on cash? 10%? 15?

What mistakes did you make in the process? What pitfalls should I avoid?

Thank you!