All Forum Posts by: Paul Ellington

My wife and I are scheduled to close on a HELOC this upcoming week and throughout the process banks advertised interest only payments during the draw/advancement period of 10 years. When I received the final paperwork I noticed my minimum monthly payment was "the greater of $100 or the accrued finance charge, plus any fees and amounts past due." I interpret this to mean I owe $100/mo. regardless of whether I use it or not and that's in addition to the $100 annual fee that is waived if I accumulate over 100 dollars in interest over the year. My question to anyone with experience is, Is this a normal term for a HELOC or are there banks that will allow me to pay nothing unless I'm using the HELOC? I called around to roughly 10 banks to find one that offers a HELOC on an investment property and I'm wondering if that's why the terms are not what I originally anticipated. Any help would be appreciated and for what it's worth I think we will still close because at the current rate if I draw 25k out of the HELOC my monthly payment will be roughly $100 so I can then deploy the 25k and at least feel like my monthly payment isn't a waste. I'm hoping to use this money plus personal capital to buy and fix a house to later refinance (BRRRR) and repay what I borrowed on the HELOC. For $100/month having 25k to invest doesn't seem bad at all but someone reading this may disagree and I'd love to hear any opinions. Thanks!

Hi Billy,

I have had a different experience with house hacking than other people here are referring to. My wife and I moved to Leesburg last year to buy our first SFH and kept a condo in Tysons Corner as our first house hack. We needed to negate the mortgage on the condo for our DTI to qualify for the house we wanted and our lender (from Loudoun) had no issues counting 100% of our rent towards the DTI without any prior land lord experience. The only stipulation was we needed a signed lease, which given your situation shouldn't be hard to get from your parents.

After considering your entire situation I'm not sure why your parents wouldn't sell the property and pocket some money but if they don't want to move and want to "save the farm" as you've said I would recommend finding a lender who will count the entirety of rent as a way of negating your mortgage payments. My in-laws live in Purcellville off Snickersville turnpike and this is something my wife and I will likely be considering as the in-laws age and my wife and I continue our REI journey. Of note,@Sudhanshu Singha is right in that land in western Loudoun is at a premium but you can get a significant discount/break on your property taxes if you sign something saying you won't subdivide or sell to a developer.  I'm not sure on all the legality of that form but my in-laws have mentioned it as they have 6 acres and a few horse stalls themselves.  

That's a very interesting situation you've got but I tend to believe anytime you can buy and hold real estate in this area (especially if that means keeping your parents in their house) then you should at least explore that option.  Obviously your parents may just want a fresh start with some money in their pockets but if you choose to pursue the property please share the journey on here as I will likely be doing something similar in the years to come.  Also if you need a lender reference who I know used all of our rent to negate a mortgage in the pre-approval process you can direct message me. Just out of curiosity where is the farm located?

Best of luck,

Paul

Thanks again @Trevor Aydelott I was able to find a couple banks willing to do HELOCs on investment properties and have more I can call if I decide I don't like the terms from TD Bank and Penfed.  Just goes to show you shouldn't listen to to people telling you it can't be done @Russell Brazil.  Find a way to make it happen and explore all options. 

@Trevor Aydelott thank you so much for the response and information! I am still unsure as to how banks are going to respond given the current situation but as you said it costs nothing to try. I'm hoping to find a bank willing to open a HELOC just so I'm positioned if an opportunity presents itself. Again thank you for the positive response.

I'm looking in to getting a HELOC on my investment property and was wondering if anyone from Loudoun/Fairfax County had experience with this. I've heard it can be difficult to find a bank willing to do a HELOC on an investment property and was hoping someone would be able to tell me where they've had luck in the past. Thanks!

@Adrienne Green I might see you there.  Keep me updated if you are to branch off and start a Leesburg meetup

I would be very interested in a REI meetup in Loudoun County if you were to start one Adrienne. Please let me know if you choose to plan one and I'd be glad to try and help in any way that I can. I admittedly have no experience with a REI group but would love to see one in Leesburg.

Thanks Dave and Lien! My biggest concern is we would have to take out a loan as a rental property whereas we have a current mortgage based on a primary residence (i.e. put 3% down and PMI is lender paid). In our area I'm not sure the equity we have would be enough to cover 20% down required on a larger rental property like a townhouse. I'm also unsure about the process of applying for a loan for a rental property. My understanding is the requirements are much higher in terms of being approved for a rental property loan vs. a primary residence.

Hi BP forum,

My wife and I recently moved in to our first single family home and stumbled our way in to real estate investing after house hacking our condo and keeping it as a rental property. With high HOA fees we break even every month on the property and are hoping to increase the rent next August. With a property that is appreciating well and is a break even property, would it make more sense to do something like a 1031 exchange and look for a better property like a SF or townhouse for a better ROI? Another option would be to hold on to this property and potentially use the equity for a down payment on another property some day. Any advice is greatly appreciated. We live in Northern VA for anyone who knows the market. Our condo is a 2B/2BA in Tysons Corner with a ton of new development and looks promising from an appreciation standpoint but that's a gamble considering all expenses aside from mortgage, HOA, and utilities will be on us.

Thanks!

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $270,000
Cash invested: $27,000

House hacked our first condo in to a rental property once we bought a single family home