How to use this $400,000 unit?

[Joshua Slatton]

Hello everyone, i am posting in hopes that someone will be able to assist. My father and i are both owners of 1 unit. He owns his outright. We are trying to use his property with a heloc; however, his financial situation is hard to explain to a bank not allowing him to get approval. We were told we could get a commercial loan with the property being in an LLC. However, we run into the financial situation again. We thought about a 1031-exchange. But he would like to keep in the family if possible. The only other option that we could come up with is sell it to me and get a heloc once everything happens. If anyone has any advice on this we would greatly appreciate it.

Thank you! 

Sorry if any spelling or grammatical errors! 

[Guifre Mora]

@Joshua Slatton

Although every loan is unique and each lender varies with their requirements, one would find that these items are consistently what make up a comprehensive loan package. As a professional lender I will guide you based on the information provided.

You mentioned you ran into the “financial situation again” it’s vague statement and for us to give you useful advise we need more information. It’s a red flag that twice you where denied for financial issues ...

You mentioned it was a gift form family and hard to proof (ownership?) it it under a family trust?

please elaborate or PM if you want to keep it private.

For the sake of this post here for what you shared and what could be available:

Condo, owned clear and free appraised value of 400k

Investment property under LLC

Vacancy status. Unknown

Monthly rent. Unknown

Market rent comp. Unknown

Years owned. Unknown

Purchase price. Unknown

Taxes current. Unknown

HOA property. Unknown

Borrowers experience in RE. One property owned (subject property)

Borrower credit Poor

Financials unknown

Loan request cash out refinance 75%

You’re going to have to go the commercial loan origination route and let me give you pease of mind on this and for all future investor reading this.

Commercial mortgages are lenders (banks, private equity etc) that offer mortgages for specific time of properties that are not owner occupied primary residence witch are under strict legislation.

This could be why you where denied. You must approach a specific lender who’s niche is Investment properties.

Rates are higher the a conventional owner occupied mortgages and that a fact of life for all investors. (Unique for each individual and deal)

Even if your dad's financials are bad as long as his Fico is around 620 title is clear, LLC is in good standing there are lenders with a product that fits.

Rates will vary depending on Fico, location, DCR, vacancy etc ... LTV 75 and lower, is a matter of checking off boxes and see what fits your scenario.

Little hard to give you a good faith direction to follow with out having all the info.

As for your question. I'm not a fan of HELOC for one reason. It hits your personal credit. Adds debt, monthly payment commitments and is a large balance loan so banks and lenders will see that you are a riskier borrower because you can get your self in trouble by over extending credit use. It's my personal view and there will be other who successful have used them in RE.