How to access equity for flipping?

[Sheila Gonzalez]

Hi everyone

I have a question I hope someone can help me with.

We own and live in a two-family house in Queens NY with about 500k in equity. I would like to buy 1-2 small houses to live/flip and rent out both the apts. in Queens.  We have about 78K in CC/personal loan debt. I applied to borrow 230k Equity loan from a credit union, but they want a statement explaining what the money is for -other than paying back the debt.

Some of it will be for updating this house (there’s not much left to do) however, when I mentioned to the loan processor that we also want to buy another 1-2 houses to live in/flip, he said that that would be considered riskier and there would be more scrutiny -so we might not be approved for that much. Some of the paperwork said that if the money is for home repairs/updating they need written estimates. I don’t know how to go about this.

Should I exaggerate how much the repairs/updating are? Is it OK to say the funds are for just spending/trips/cosmetic surgery etc?

I thought that saying it’s for investment it would not be a problem at least it’s not to waste on junk. It would mean a significant increase in income since that would be his FT job. (He only works PT in a low paying job right now). If he could flip 3-4 properties a year (at 30K each) we would double our income.

How do other investors that are just starting off access equity from their property? 

[Larry Turowski]

@Sheila Gonzalez Don't even consider a HELOC if you do not have financial discipline and will either run up your cc again or use your HELOC like a piggy bank.

That aside, this bank seems to be asking too many questions. You don't need to lie but you don't need to give them more information than they need, either. If they won't approve you for the maximum HELOC you could possibly get, tell them you'll shop elsewhere.

It is reason enough to say that you'll pay off your cc, and it would be nice to have the HELOC available if needed, that you have no immediate plans to use it (which is true unless you have a house under contract) but what it would allow you to do, for example, is to keep a much smaller cash savings rainy day fund and instead use that money to further pay down debt (HELOC and mortgage).