Establishing a HELOC on a rental property

[Joseph M.]

Hi Fellow Investors,

This is my first post on BP, but I have been a BP reader for some time. So I am hoping that with your collective knowledge, you may be able to assist me. I have been a buy&hold investor and LL since June 2000 and have experience with all types of properties, including developing land. With that said, here is my question. I currently own, free & clear a few A-/B+ class SFR properties. I would like to tap into the equity of one or two of them so I can continue to expand my portfolio. I would like to be able to obtain a HELOC on one or two of them vs. obtaining a conventional 1st mortgage (10, 20 or 30year). By using the HELOC model, I could use the equity when needed (no mortgage payment until funds are needed) and pay back the HELOC in an accelerated fashion. This would lower each months payment AND quickly refill the HELOC for the next deal. I call this my "self-funding" model.

I have talked to a few larger banks (who love my income, debt ratio, cash flow and FICO score) BUT will only do a HELOC on a primary residence or a 2nd home. What I am asking this group is has anyone done this type of financing on rental property? If you have or if you know of a lender that will place a HELOC on a rental, please respond with a contact so I as well as others within this group would be able to give that lender a call. Also, let the group know of any pitfalls that may come with this type of loan.

Thanking everyone in advance,

Joseph

Sacramento, CA