Equity Lines on Rental Properties

[Brian Baker]

Hello BP Community,

Have you had experience with equity lines of credit on rental properties? What kind of qualifications do lenders use for them? Are they harder to establish than lines of credit on primary residences? How did you go about finding lenders that would set one up (I know many traditional lenders won't)?

[Mike Dorneman]

@Brian Baker that’s the BRRRR 😁 Nearly all of my rentals are leveraged with HE lines or loans which I then use to buy the next property, then repeat. You’ll find that your local bank can and will get thesenloans done for your quickly. (Assuming you have a good Debt to Asset ratio personally and high credit score. The loans I get are all commercial, with a personal guarantee. One benefit here is a single credit pull / application. Meaning I only need to submit my personal financial statement every 6-8 months and that’s it. No additional credit pulls or applications. This is great for me because I’m averaging a property / month so going through all that paper work and hoops would be a major pain.

[Brian Baker]

@Mike Dorneman, thank you for your reply. And hats off to you for doing a deal per month, that's awesome! I'm feeling like I may not have bought well enough to BRRRR on this one. It cash flows well, but I refinanced to pull the money back out, there won't be much of cash flow cushion left if I need to lower the rent at some point in the future. That's why I'm wondering about a line of credit instead. So I could use the equity on an as-needed basis instead, and replenish it when I BRRRR then next one! :-D

Have you ever opened a line of credit on any of your rentals vs a cash out refi?

PS - Nice to talk to a fellow Pennsylvanian. I grew up in Western PA, but had to get south to escape the winters.

[Vincent Ballew]

I am having trouble finding a bank that does HELOCs on investment properties in the Indianapolis area any advice would be appreciated!!!!!

[Martin L.]

@Brian Baker@Vincent Ballew

Most banks won't HELOC on an investment property. Try PenFed, they do up to 80% LTV. If you don't qualify through military connections, you can join one of the designated military support associations to qualify. It takes a small donation.

[Mike Dorneman]

@Brian Baker Most of the properties have loans, but undo have 2 lines. I placed the lines on the 2 properties with the highest values. I did so to ensure I’d have ample liquidity to jump on other deals when they come up. About a week or 2 after purchase, I order the appraisal and refi out. I use that to pay the line back down and start all over.

[Kerry Baird]

Wells Fargo, TD Bank and PenFed said yes, when others said no.  

I would also try local community banks or credit unions.

[Sunny Shakhawala]

@Brian Baker ELOC are great for funding deals. Thats what I use to fund all of my PML deals. You need to spend a good 4 hours just calling different banks (credit unions) and finding out what their terms are for secondary or investment home helocs. That’ll tell you all you need to know. First question should be, “do you do interest only payments” lol. Paying principal contributions on a HELOC sucks.