No HELOCS on rentals in Texas

[Keith A.]

Well so much for my grande idea. My rentals have been all bought with the heloc on my primary. Well now I’d like to put the equity of my free and clear properties to use. My big idea was to get helocs on those properties but I just found out no can do in TX. Crud. Heloc is all I know. So now I’m watching vids on cash out refis.

Any Texas investors have a preferred way of using the equity of your free and clear Non owner occupied properties? Traditional investment property loan probably the worst idea? Thanks in advance.

[Costin I.]

@Keith A. @Carolyn Hodo - 

That unicorn does exist, but is called "portfolio LOC" or "asset based LOC". You just need to ask the right person for the right product at a bank.

1. Do not confuse HELOC (home equity line of credit) with HEL (home equity loan) - one is a "reusable" product, the other is a one time deal. LOC you get charged interest on the balance when used, the other you get charged interest on the whole balance from the moment you get it. LOC you can pay it down and reuse, the other you pay it down and gets closed.

2. There is no HELOC for an investment property. But you can get same thing - a line of credit (LOC) or portfolio LOC or asset based LOC - you just need to find the right bank and the right person in the bank who knows about this type of product (usually a commercial banker). Don't bother to ask a residential loan officer about HELOC on a rental, they will tell you "impossible" and not even know of alternatives.

Again: You can get an LOC on your rentals by asking a commercial lender about asset based LOC or portfolio LOC. A residential loan officer doesn't know about this product. We do have one LOC secured by two rentals that we use to make cash offers on properties we rehab, lease, refinance and repeat.

3. Shop around - the differences in LTV/LTC, fees, renewal fees, periods, terms, rates, closing, documentation required, etc. are substantial from bank to bank. You can see below a comparative sheet I used to bring them to an apple-to-apple comparison when I was looking for something like this 2 years ago.

4. You can get a portfolio LOC from several sources - I recommend Amplify CU (and to stay away from Wells Fargo). Most likely they offer portfolio loans too, that is an easier option to get usually.

[Note: this was from 2 years ago! Rates and conditions changed since then. We renewed ours at 6.25%. ]

Let me know if you have any questions or need more information.