Keep hitting roadblocks

[Jennifer Shearin]

Three years ago I bought my first big rehab project for $81k, and got a 10 yr. construction loan from a local bank to rehab it. My interest rate is at 4.5% and I still have that loan. It's a historic house and I turned it into a multifamily, got the rehabilitation certified by the NPS so I got a bunch of tax credits, and it's been a cash flow cow for the last two years. I put around $170k into the rehab. I estimate the current value to be around $360-380, and I owe $182k. I don't want to sell until I've used all my tax credits, and I don't want to do a cash out refi because of my low interest rate. I found a lender that said they would do a HELOC, but they are using an automated system to value the property and they are coming up with a value of $186k, using the old information and previous sales price. This is a small town and there really aren't any good comps in the historic district. So, they won't do my HELOC because they are nearly $200k off on the current value. To get a full appraisal, I would need to do a cash out refi.

How does anyone get a HELOC without a full appraisal when they've added a ton of value to a property ? I really need to tap into this equity. I am in negotiations on a new project and I was really counting on being able to tap into that money. The other problem I have is that my DTI is too high to get another big rehab loan from the same local bank. I do have a 9 to 5 making six figures, and all four of my rental properties are cash flowing, so I'm not sure why I keep hitting all these roadblocks. Any ideas?

[Peter Mckernan]

Quote from @Jennifer Shearin:

Three years ago I bought my first big rehab project for $81k, and got a 10 yr. construction loan from a local bank to rehab it. My interest rate is at 4.5% and I still have that loan. It's a historic house and I turned it into a multifamily, got the rehabilitation certified by the NPS so I got a bunch of tax credits, and it's been a cash flow cow for the last two years. I put around $170k into the rehab. I estimate the current value to be around $360-380, and I owe $182k. I don't want to sell until I've used all my tax credits, and I don't want to do a cash out refi because of my low interest rate. I found a lender that said they would do a HELOC, but they are using an automated system to value the property and they are coming up with a value of $186k, using the old information and previous sales price. This is a small town and there really aren't any good comps in the historic district. So, they won't do my HELOC because they are nearly $200k off on the current value. To get a full appraisal, I would need to do a cash out refi.

How does anyone get a HELOC without a full appraisal when they've added a ton of value to a property ? I really need to tap into this equity. I am in negotiations on a new project and I was really counting on being able to tap into that money. The other problem I have is that my DTI is too high to get another big rehab loan from the same local bank. I do have a 9 to 5 making six figures, and all four of my rental properties are cash flowing, so I'm not sure why I keep hitting all these roadblocks. Any ideas?

Depends on the bank, some due a lower LTV and get you a HELOC with no site visit and others do a site visit with higher LTV. Depends on what you need and what you want to pull out. The lower LTV (lower risks for banks/CU), higher/higher risk.

[Lotus Eli]

Getting a HELOC without a full appraisal can be tricky, but there are a few ways it might be possible, especially if you've added significant value to your property.

Showing Recent Home Improvements : Providing documentation of recent home improvements and their costs might convince a lender to waive the full appraisal.

High Equity : If you have a significant amount of equity in your home, lenders might be more flexible with appraisal requirements.

Streamlined HELOC Programs : Some lenders offer streamlined or fast-track HELOC programs that don't require a full appraisal. It's worth checking with your current mortgage lender, as they might offer these options to existing customers.

Smaller Loan Amounts: For smaller HELOC amounts, lenders might be more flexible and not require a full appraisal. If the HELOC amount you're requesting is relatively low (often below $100,000), lenders might waive the full appraisal.

Drive-By Appraisal : Instead of a full interior inspection, a drive-by appraisal involves the appraiser evaluating the exterior of the property only.

Desktop Appraisal : This type of appraisal is conducted remotely using data and photos provided by the homeowner or real estate agents.

Based on the little knowledge that I have about stuff like this it sounds like you need to connect with existing lenders in your network or find new lenders in your network that have programs aligned with your goals. It’s always a good idea to shop around and ask different lenders about their specific requirements and options. Some lenders offer unique solutions and programs for your specific situation. I pray this helps or provided a bit of guidance. 

[Will Barnard]

Why not offer your bank to do a full appraisal on the property that you pay for? Show the bank and the appraiser your itemized list of improvements with costs to help show the new value. NOw that it is also a multi family, perhaps the income approach will also better the value after analysis by the appraiser.