Can't get equity out of my investment property.

[Etan Ofrane]

Hi all.  I live in Jersey City, NJ and I recently bought a single family home right next to the one I live in for $750K.  I paid cash with money from a 1031 exchange as well as a home equity line of credit from my primary residence.  The place needs about $150-200k of work.  The problem is I am having trouble getting the equity out of the property to use for renovation.  It seems crazy that a bank wouldn't give me some kind of equity line of credit since the property just appraised for $825k but I haven't had any luck with the few banks that I've tried (TD bank and some local banks).  The issues are: 

1.) some banks have said it's not habitable (not all), 

2.) It's obviously not yet producing income since it needs work

3.) A lot of banks won't do HELOC's on investment properties

I could easily get a hard money loan, but am not really interested in paying those interest rates (14%!!!).  I'm surprised that this is so difficult as I'm sitting on a completely owned asset worth 800k.  Are there any products/banks I should be exploring?  Any advice would be much appreciated.  Also, I know that these numbers seem absurdly high to people outside the NY metro area.  That's because they are absurdly high and this area is ridiculous.  

[Andrew Kerr]

@Etan Ofrane - Welcome to BP and the world of doing work on a property slightly outside of the norm. 

You are very right, you might have to go with Hard Money. Keep in mind, the hard money loan is short term. You use it to fix the house, make it habitable, put in tenants to get income, then refinance with better terms.

You could also look at getting a personal loan. Think about family or friends. Also look at your local REIA. I am sure there are some folks that would lend $200k on a $800k asset if you give them favorable terms and a first lien position. Hell, I know I would lend on it if it was in one of the MSA I invest in.

The other option, is go to a local bank and ask for a construction loan. Think about a bank that only has one branch, or a couple branches. NOT a Bank of American or Wells Fargo size bank. These smaller banks will lend their own money, and can look at a deal like this more favorably.