HELOC on Duplex when it is a Primary Residence on a VA Loan.

Investor · Member since 2021 · 157 posts · 218 votes

4y

Hi Adam! Just messaged you. I am a conventional lender and love working with creative financing. I personally have went through the red tape you are describing and know how hard it is to deal with the nuances of needing to qualify with primary residence rental income (I have short term rentals, househacked them all, long story short). I am happy to help in anyway I can. I am pretty sure we could do better and likely can swing an approval of a HELOC on the primary #1. That being said, if you can make that happen, no reason why you shouldn't pursue #2/#3 immediately after to leverage the rest of your VA eligibility and your equity that is just sitting in your existing properties and put that to work for you.

2 Reply

Josh Edelman

Real Estate Agent · Las Vegas · Member since 2018 · 197 posts · 143 votes

3y

Quote from @Adam Joseph Reed:

What's up BiggerPockets! First post here. I have a question for you folks.

In 2020 I bought a duplex for $300,000 with my VA loan at 100% LTV. Last year I refinanced it with the IRRRL at 2.25%. In the last few months there have been comparable sales that have closed in my county at $549,000. Assuming my home would also appraise for $549K, that would leave about $255K in equity.

I am looking to take out a HELOC so that I can create some options to buy more real estate with. I have many ideas and several paths I could go, but the first step is to open up a HELOC.

I spoke with a local bank, First Citizens Bank to open up a HELOC. The draw to them was the 89% LTV. When I spoke with them, they said they could not open up the HELOC because it is not solely a primary residence. They wouldn't loan because I receive long term and short term rental income from the property.

The second bank I spoke to was United Federal Credit Union. I had heard they did HELOCs on rental property at 80% LTV so I started the conversation with them. They also would not approve the HELOC because even though my long term tenant covers all but $25 and I received STR income when I am away from my primary home, they wouldn't open the HELOC because I live there.

These responses seemed like a Catch 22 and I am not sure how to proceed.

Which leads to my questions:

1. What Lenders might approve a HELOC on a primary residence receiving rental income?

2. If I can't find one that will do it, should I shift my focus to just buy another primary residence with the remaining VA eligibility then apply for the HELOC again?

3. Or should I refinance the duplex at a higher interest rate and pull out my equity and buy other real estate with a 20% down payment on more than one property? I think this would free up my VA loan to make another purchase, as well as a higher return on equity.

4. Or a combination of #2 and #3?

5. Just hang tight and continue to pay the mortgage?

Thank you for reading these semi complex questions. I am open to any and all feedback as I get clear on a game plan moving forward.

Onward and Upward.

Adam, I just did this on my property - literally the same set up. I found a lender who let me take a HELOC out of my VA primary residence which I would use as a rental and use that HELOC to purchase a second one. Its been ten months but let me know what you ended up doing!

0 Reply

Zach Wain

Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes

3y

@Adam Joseph Reed - I am not licensed in NC, but a Mortgage Broker will have access to multiple HELOC options and has a better chance of finding a lender that will play ball with your scenario. I have a colleague that runs a great company in NC, I am happy to connect you.

1 Reply

Adam Joseph ReedPro Member

OP

Realtor · Western NC · Member since 2022 · 5 posts · 4 votes

3y

Quote from @Josh Edelman:

Quote from @Adam Joseph Reed:

What's up BiggerPockets! First post here. I have a question for you folks.

In 2020 I bought a duplex for $300,000 with my VA loan at 100% LTV. Last year I refinanced it with the IRRRL at 2.25%. In the last few months there have been comparable sales that have closed in my county at $549,000. Assuming my home would also appraise for $549K, that would leave about $255K in equity.

I am looking to take out a HELOC so that I can create some options to buy more real estate with. I have many ideas and several paths I could go, but the first step is to open up a HELOC.

I spoke with a local bank, First Citizens Bank to open up a HELOC. The draw to them was the 89% LTV. When I spoke with them, they said they could not open up the HELOC because it is not solely a primary residence. They wouldn't loan because I receive long term and short term rental income from the property.

The second bank I spoke to was United Federal Credit Union. I had heard they did HELOCs on rental property at 80% LTV so I started the conversation with them. They also would not approve the HELOC because even though my long term tenant covers all but $25 and I received STR income when I am away from my primary home, they wouldn't open the HELOC because I live there.

These responses seemed like a Catch 22 and I am not sure how to proceed.

Which leads to my questions:

1. What Lenders might approve a HELOC on a primary residence receiving rental income?

2. If I can't find one that will do it, should I shift my focus to just buy another primary residence with the remaining VA eligibility then apply for the HELOC again?

3. Or should I refinance the duplex at a higher interest rate and pull out my equity and buy other real estate with a 20% down payment on more than one property? I think this would free up my VA loan to make another purchase, as well as a higher return on equity.

4. Or a combination of #2 and #3?

5. Just hang tight and continue to pay the mortgage?

Thank you for reading these semi complex questions. I am open to any and all feedback as I get clear on a game plan moving forward.

Onward and Upward.

Adam, I just did this on my property - literally the same set up. I found a lender who let me take a HELOC out of my VA primary residence which I would use as a rental and use that HELOC to purchase a second one. Its been ten months but let me know what you ended up doing!

@Josh Edelman That's awesome! In short I waited to file my tax returns. I made more money last year than the year before but I can't prove it until the returns are filed. My expectations are to file the returns, apply for a HELOC from a lender that will loan on a primary residence that receives rental income, and then use the remaining portion of my VA loan at some point later in the future. I have considered buying raw land with the HELOC or going in with a partner with either private money or equity stake to build new construction duplexes. But it all hinges on the HELOC. What lender did you use? Did your primary residence receive rental income while it was your primary? That has been the sticking point when finding lenders for me.

1 Reply

Adam Joseph ReedPro Member

OP

Realtor · Western NC · Member since 2022 · 5 posts · 4 votes

3y

Quote from @Zach Wain:

@Adam Joseph Reed - I am not licensed in NC, but a Mortgage Broker will have access to multiple HELOC options and has a better chance of finding a lender that will play ball with your scenario. I have a colleague that runs a great company in NC, I am happy to connect you.

Zach thanks for the post and the add. I've called up several in the past that would do primary residences, but not rentals, and others would do rental but not primaries, what I need is one that is ok with the hybrid. I briefly talked with PENFED but I needed to have my tax returns completed to help get approved in order to show a lower DTI. Will contact that referral you sent! Thanks very much for that!

0 Reply

Josh Edelman

Real Estate Agent · Las Vegas · Member since 2018 · 197 posts · 143 votes

3y

Quote from @Adam Joseph Reed:

Quote from @Josh Edelman:

Quote from @Adam Joseph Reed:

What's up BiggerPockets! First post here. I have a question for you folks.

In 2020 I bought a duplex for $300,000 with my VA loan at 100% LTV. Last year I refinanced it with the IRRRL at 2.25%. In the last few months there have been comparable sales that have closed in my county at $549,000. Assuming my home would also appraise for $549K, that would leave about $255K in equity.

I am looking to take out a HELOC so that I can create some options to buy more real estate with. I have many ideas and several paths I could go, but the first step is to open up a HELOC.

I spoke with a local bank, First Citizens Bank to open up a HELOC. The draw to them was the 89% LTV. When I spoke with them, they said they could not open up the HELOC because it is not solely a primary residence. They wouldn't loan because I receive long term and short term rental income from the property.

The second bank I spoke to was United Federal Credit Union. I had heard they did HELOCs on rental property at 80% LTV so I started the conversation with them. They also would not approve the HELOC because even though my long term tenant covers all but $25 and I received STR income when I am away from my primary home, they wouldn't open the HELOC because I live there.

These responses seemed like a Catch 22 and I am not sure how to proceed.

Which leads to my questions:

1. What Lenders might approve a HELOC on a primary residence receiving rental income?

2. If I can't find one that will do it, should I shift my focus to just buy another primary residence with the remaining VA eligibility then apply for the HELOC again?

3. Or should I refinance the duplex at a higher interest rate and pull out my equity and buy other real estate with a 20% down payment on more than one property? I think this would free up my VA loan to make another purchase, as well as a higher return on equity.

4. Or a combination of #2 and #3?

5. Just hang tight and continue to pay the mortgage?

Thank you for reading these semi complex questions. I am open to any and all feedback as I get clear on a game plan moving forward.

Onward and Upward.

Adam, I just did this on my property - literally the same set up. I found a lender who let me take a HELOC out of my VA primary residence which I would use as a rental and use that HELOC to purchase a second one. Its been ten months but let me know what you ended up doing!

@Josh Edelman That's awesome! In short I waited to file my tax returns. I made more money last year than the year before but I can't prove it until the returns are filed. My expectations are to file the returns, apply for a HELOC from a lender that will loan on a primary residence that receives rental income, and then use the remaining portion of my VA loan at some point later in the future. I have considered buying raw land with the HELOC or going in with a partner with either private money or equity stake to build new construction duplexes. But it all hinges on the HELOC. What lender did you use? Did your primary residence receive rental income while it was your primary? That has been the sticking point when finding lenders for me.

I used a private lender and at the time it did not have rental come. I used the HELOC to buy the home I could move into, and then rent it out.

0 Reply

HELOC on Duplex when it is a Primary Residence on a VA Loan.

HELOC on Duplex when it is a Primary Residence on a VA Loan.

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