All Forum Posts by: Jason Crow

Best decision we ever made. We have flipped a bunch of properties and our Airbnb property is doing well. Once you have your Heloc, just make sure you remember to be very conservative with your flips and you will make money. Last thing you want is to lose your current assets risking it on future assets.

Just checking in again. I am happy to say HELOC has been a fast track to achieving our dreams. We were able to pay cash at foreclosure auction to get a steal of a deal and flipped it for a quick 70k. We have since purchased 4 other homes (1 with land, 3 that we moved) and an additional 25 acres that we are using as A combination of long term rentals and air bnb. We pay no loan fees to withdraw and deposit, the interest is only on what we have borrowed at the time, and is super low (1.4%). Having cash on hand for buying has become a huge advantage and I highly recommend this approach, if it's an option for you.

@Andres M. and @Matthew Watson - First, my apologies Andres. I must have missed your inquiry. As far as how it has worked out so far, we are extremely happy we did it. While the process took far long than we had anticipated, and there were some hiccups along the way, all in all it has been fantastic. It opened up a nice source of unused income that we have been able to use to get a house to flip at foreclosure auction, some acreage to set up some rental houses on, and we are currently looking at finding some rental homes to move out to the acreage. 

@Andrew Macdonald There are some banks that will still do HELOC on investments, but not many. The few that do will not provide as high of a LTV and the interest rates are a lot higher than a standard HELOC. Wells Fargo will do it, but they can be a nightmare to work with. I have seen folks post Regions Bank on the forums as another, but don't have any personal experience working with them.

Also, to confirm what Lynn stated, I have a HELOC that I recently opened and it does contain a clause that they can call the note in, in full, if you do not maintain it as your primary residence.

You are going to have a tough time finding a bank that will allow you to do an investment property HELOC and the few that do don't go any higher than 75% (most are closer to 50%) LTV. Being as you are already at 80%, neither of those scenarios will work. Gone are the days where the banks will lend at full or greater than full value.

Wells Fargo does them too, but they can be a nightmare to work with. Investment HELOCs are not as easy to come by anymore because most people are much more willing to let their investments go for non payment than they are a primary residence. It's a much higher risk for the banks.

Cash out refi one of your other properties or find a portfolio lender to build a relationship with.

The bank will send out their own appraiser (although it may not be a full scale appraisal depending on how big the LOC is you are looking for). You should let them know it was rehabbed, because the appraiser may literally do a drive by and just use the old appraised value to make their assessment.

Just wanted to provide some updates for informational purposes. 

1. Couldn't find any banks in Texas that allow for HELOC on investment/rental property. That being said, we didn't really go down this path much as we wanted a bigger chunk of change than our rental would have provided anyhow.

2. Our primary residence and land comps came back at about 1.5 mil. That isn't the appraisal that the bank requires, so we are expecting it to be slightly less than, but either way enough for our purpose.

3. The reason I mentioned comps/appraisal is because we are looking at a 500k LOC. What is interesting to note about a LOC this high is the banks required we utilize a title company to close. The importance there is the reason the HELOC was as appealing as it was (besides the low interest rates) is because there are little to no closing costs. Well, LOCs over 125k here do not get that luxury. So, we will have to pay some closing costs, but it's only a one time deal during the term of the LOC, so still better than using mortgages over and over. Plus, there are no stipulations on how we use the money, so also better than a Home Equity Loan.

4. We own 25 acres with this property. Those 25 acres are Ag Exempt. In Texas, a bill was passed approx. 10 years ago I believe, that makes it illegal for banks to offer LOC on Ag Exempt Property. Where does this leave us? Well, basically we have 2 options :

Remove the Ag Exemption (Not gonna happen because we were grandfathered in and it takes 5 years to reclaim an exemption).

Get a new survey done and section off the 1 acre the house is located on, as it doesn't get reported to the county as Ag Exempt anyhow. The issue is even though the county taxes you that way, it has to be officially done via survey for the bank to proceed. There are some other small items like if you are on well water the well has to be contained within 30 feet of the acre you subdivide as well as road access, but none of those were an issue in our case. Just something to be aware of for others. Going to cost us another $3500 or so due to the size of the property.

5. Because of the above scenario, we also cannot count the remaining 24 acres for appraisal/LTV purposes. Our house and the acre was still enough to achieve our goal, but again something for people to be aware of because it did substantially cut the amount the bank will take as consideration.

I will continue providing updates on our journey, but hopefully this information will be helpful to others looking at HELOCs to start their real estate investing future!

After doing online research, getting tons of good advice from here, speaking with 3 mortgage brokers, 2 lenders, and 1 financial advisor, we have decided to move forward with the HELOC. We did find some good investment products that I was pleasantly surprised by, but in the end the LOC just made the most sense. I will keep everyone updated as to how things turn out. Thank you all very much for your input!