Can I get a line of credit for Investment Properties?

[Shaun Hood]

My wife and I own 3 properties, two of which are rental properties.  We are very new to real estate investing, but off to a good start.  We recently turned our primary residence into a rental, and have about $100k in equity in that property.  We bought a new primary residence where we have very little equity.  I've been told that I cannot get a line of credit on our rental properties-- is this true?  I listen to these podcasts, and it sounds to me that I can definitely get a line of credit on rental properties.  Your experience and insight would be greatly appreciated.  Thank you in advance!

[Kerry Baird]

I see so many comments in these forums that a HELOC on an investment property cannot be done. Well, we do the impossible several times a year. :D

There are a number of places where we can get HELOCs on investment properties. Nothing that you mentioned would trigger a typical due on sale clause. Refinancing replaces the older first position mortgage with a newer one, while a HELOC leaves the original mortgage in place and adds another mortgage in second position. A HELOC is a revolving type of instrument, and they are typically interest only. This means that it acts somewhat like a credit card, as I can pay it off and use it again; the interest rate is quite low. My last HELOC (with PenFed) will adjust at the 10 year point, and become a regular amortizing second mortgage.

—As an aside, this occurs when a person has their name on the deed (which conveys ownership) and also on the mortgage.  Then they transfer the deed to another party, for example when selling “owner finance” while the mortgage references the original owner.  The bank can call the loan due, meaning it must be paid off or remortgaged, typically within 3 months. 

Back to the original point, which is that TD Bank, Trustco Bank, US Bank and PenFed (only if you own fewer than 4 properties in your own name) and perhaps a small local-to-your-property lender, a credit union, advertise that they do HELOCs on investment property.