Need Line of Credit on a Rental in Alabama

[Gary Michalske]

Hi BP'ers:

I have a need to obtain a line of credit on a free and clear rental property I own in Huntsville, AL. I have a HELOC from Bank of America on my Tennessee personal residence but they won't give me a line of credit on an investment property. I was going to ask Franklin Synergy (portfolio lender in Tennessee) if they would do it but I heard that they won't for out-of-state properties. Does any one have any references for banks near Hunstville that might provide a line of credit for investment properties?

[Dmitriy Fomichenko]

@Gary Michalske

The fact that you don't own this property personally and your 401k owns it makes significant difference. You are not allowed to use conventional financing inside of a retirement account. Your credit score has nothing to do with your ability to finance it, the lender will be looking at the property, not you personally, so the property value and the income property produces will play a role. And I doubt that you can get a line of credit on a property owned by your 401k. You can potentially refinance the property and get a cash-out loan. Please note that the loan must be non-recourse. And the IRS rules do not allow you to provide a personal guarantee, this would be considered prohibited transaction. Here is a link to the IRS website for reference (whoever setup your self-directed 401k should have informe you about this):

https://www.irs.gov/retirement-plans/plan-particip...

Most lenders out there do not offer such loans. Over the years we compiled a list of lenders who do, I'm sure one of them will be able to help you refinance your property, here is he list:

https://www.biggerpockets.com/blogs/2810/50272-lis...

Don't expect to get 80% equity, since the loan is non-recourse it is higher risk to the lender, they will typically finance 30-50% LTV.