HELOC and Refiance Options

[Justin Jacobs]

Hey everyone really need some help trying to bring my investment to a full time level. I own 3 units currently. 

I'm trying to get a HELOC on my 1st investment property after an appraisal I will have 80,000 available in the house at a 75% LTV. I was denied the HELOC based on my debt to income ratio today. How do I leverage this property? I would be denied a refinance and cash out as well?
I was wanting to use the line of credit to fund another investment purchase. I was going to use a hard money lender to finance the property and PML for the down payment. I haven't used a HML but from what I have found is that they won't look at my debt to income ratio? THE HELOC money would be used to pay for the HML and to fund the rehab project.

My goal would be to build enough value to refinance the rehab project and pull out the cash to pay back the PML and rent the property afterwards. Would I be denied a refinance from a bank here as well even with leaving them enough skin in the game to satisfy them? My Worse case scenario I would sell and just consider the purchase a fix and flip instead of a BRRRR which I'm okay with. I just don't understand how to leverage my property to use that money is there no way to ? Will I not be able to ever refinance deals because of my debt ratio?

thanks for the help

[Brit F.]

@Justin Jacobs, if a conventional lender is denying you based on DTI, you should carefully evaluate your position & risk. Are you sure they are calculating DTI correctly? For example, are they including all rental income? (Some may not include rent that hasn't yet appeared on a tax return). If they are calculating DTI correctly, then it sounds like you may need to tap the brakes. I'm generally not a fan of max leverage on every property...but other people are, so to each their own.

If your DTI is too high for a HELOC, it's probably too high for CO-refi, but theoretically you may have better terms with the CO-refi that could slide you just below that lender's DTI threshold. It just depends.

You could potentially find risk tolerant lenders with more relaxed DTI standards, but you'll pay a hefty premium to compensate them for that risk - which could really put you in a DTI pickle.