Planning to Purchase With HELOC Funds. Need Help With The Basics.

[Karen Johnson]

Hello fellow BPers!

I've been reading related posts on the forums, but I need someone to explain a few things to me slowly and carefully, LOL.

Here is what I would like to do:

-Take out a HELOC on one of my investment properties.

-Use said HELOC as (part of) a down payment to purchase 5 units.

--Note: The 5 units will be split apart and sold as a duplex and a triplex.

My initial questions (and I probably should have more) are:

-Since I'm hoping to purchase all 5 units, does it make more sense to get a commercial loan, vs. trying to get 2 conventional mortgages? Seller is set on re-zoning as opposed to keeping the 5 units tied together.

-For commercial loans (I've never done one), can I acquire one as an individual or must I open an LLC?

--If both are possible, is one more beneficial? I understand that I may still need to personally guarantee the loan even if I create an LLC. I'm reading up on commercial lending, but still in the beginning stages so any insight would be helpful.

-Do I need to take a draw from the HELOC and allow the funds to get "seasoned" in my account, or do I just need to show proof of the draw from the HELOC when the time comes?

-Are there any other things to consider besides making sure to account for loan repayment is accounted for in the numbers?