HELOC on rental property ?

[Alex S.]

About to purchase a property that I will use for rental. Property has a value of $137K and only 46K is owed.

• 1) I was thinking to pay off the $46k, then get a line of credit and reimburse my cash from the line of credit, then have the rest of line of credit in case I need to use it at later date.
• 2) Or do a quick claim deed, and then take out a line of credit. However if I did it this way, the due on sale clause could kick in, since I will be taking out a second (seller is ok with keeping existing mortgage in place, which will still be in their name)
• Also I want the property in my business name and not my personal, not sure if that will affect applying for a HELOC. A lender friend of mine told me to buy the property cash and in seven days she could get me about 90K loan on property. But I don't want a loan that I am paying on, even if I am not using the funds. With HELOC I only pay on funds that I use.

Anyone have any suggestions? Usually I just buy and sell, I want to keep this one, but want my cash back out, with access to a line of credit. Just not sure the best way to structure deal.

[Andrew Postell]

@Ronald Trepton and @Alex S. if you are still looking for a Line of Credit on an investment property a small, local lender will be your HIGHEST probability of success. The unfortunate thing here is that investment properties foreclose at a higher rate than primary homes so many banks just don't want the exposure to this. But it is 100% possible to find but you have to put in the time or at least know someone that ALREADY has the connection. Here's my 3 suggestions:

1. Post in the Bigger Pockets STATE forum that you are looking in. There are usually some good, local investors that monitor those forums. Maybe they already have a suggestion or recommendation for you? Certainly try there.
2. Visit your local REI groups. There are many groups that meet across the country. Some post here on Bigger Pockets. Many post on meetup.com. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you.
3. Calling - and then there's this option. Which is what I had to do. I had to call about 200 lenders (no exaggeration) to learn of 4 lenders who did this and I have some tips. First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, try to ask for "LINES OF CREDIT" instead of "HELOC". I know it sounds like I'm splitting hairs but some banks write HELOCs in their residential department....which won't write Investment Properties. And that residential department will often not speak to the commercial department. So they'll just say "sorry, we don't do it"....not even knowing that they really do! So if you ask for a "line of credit on an investment property" that should get you to the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT