Forum Thread

Looking to borrow against rental property equity for another rental property, lender with best rates and terms?

1,175 144 February 12, 2018 at 04:29 PM
Deal
Score
0
1,711 Views

Thread Details

0 Deal Score
1,711 Views
I have a rental home that's been rented now for 19 months.

It's worth about 140k I owe 68k. Looking to get a second property for rental.

I'd like to open a HELOC whereas whenever I find a property I want to move on I can quickly access the down payment money.
Otherwise it might be seldom if ever used. I could also use it if I needed several k fast to replace a central AC.

For rental I'm looking at prob a SFH 2 car garage, hopefully around 125k -130k

Best I'm seeing so far is penfed. Currently. 5.5% (prime +1) variable. Not sure if they charge an annual fee but otherwise no cost to open if we can avoid an appraisal.

My plan would be, for example, buy a 125k home, take 25k from HELOC and then borrow 100k on conventional mortgage.

I calculated that if rates remain reasonable then I'd pay the conventional mortgage at a 30 yr schedule for the first 4 years while I in parallel pay off the 25k HELOC borrow in about 4-5 years, then I'd start paying extra on the conventional to shorten the years.

Please let me know if maybe there's a better way I should be considering the buying of another rental.

I just have one rental now, it's been great and I'd like 3-4 more rental homes in the next few years. The goal really being to have then basically cover their own costs till their mortgages are paid off in about 15-18 years.

I don't have 25k cash for down payment and won't because I pour my extra income into my 401k

10 Comments

1

Sign up for a Slickdeals account to remove this ad.

This comment has been rated as unhelpful by Slickdeals users
Joined Jan 2008
L6: Expert
1,435 Posts
659 Reputation
#2
Probably better to do a cash out refi since the tax laws have changed regarding the heloc.

You'll still need to show that you have a reserve cash supply for mortgage payment in the event that its not rented. I use my retirement account to prove this, but it's only counted at 50%, IIRC.

US Bank was a PITA to work with, but they had the mortgage product that I needed and a good rate. I had bad people all around, but my understanding is that my results were atypical.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2007
L6: Expert
1,175 Posts
144 Reputation
Original Poster
#3
Quote from Lakee911
:
Probably better to do a cash out refi since the tax laws have changed regarding the heloc.

You'll still need to show that you have a reserve cash supply for mortgage payment in the event that its not rented. I use my retirement account to prove this, but it's only counted at 50%, IIRC.

US Bank was a PITA to work with, but they had the mortgage product that I needed and a good rate. I had bad people all around, but my understanding is that my results were atypical.

Thanks for replying.

A cashout refi requires me giving up my owner occupied 3.5% 15 yr rate, and taking a 5+%
rate on an investment prop loan.

I then also start paying on this money immediately when I might not find the next investment property for months. FYI.


In my research interest on HELOCs for primary homes is not deductible, but interest on rentals still is. Maybe I'm not finding accurate info on that.

I still keep several K accessible in my checking on a monthly basis, plus I have a large 401K holding that could be accessed in an emergency.

I keep reading about people using some creative financing to buy 5 homes in a year. That Im not sure how to do because I thought the DTI would stop you until you could show a years rental history on any home bought. I need to learn more on that front.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Aug 2014
L4: Apprentice
421 Posts
26 Reputation
#4
Quote from Rhizzlebop
:
Thanks for replying.

A cashout refi requires me giving up my owner occupied 3.5% 15 yr rate, and taking a 5+%
rate on an investment prop loan.

I then also start paying on this money immediately when I might not find the next investment property for months. FYI.


In my research interest on HELOCs for primary homes is not deductible, but interest on rentals still is. Maybe I'm not finding accurate info on that.

I still keep several K accessible in my checking on a monthly basis, plus I have a large 401K holding that could be accessed in an emergency.

I keep reading about people using some creative financing to buy 5 homes in a year. That Im not sure how to do because I thought the DTI would stop you until you could show a years rental history on any home bought. I need to learn more on that front.
Which bank did you go with. Interested in a heloc but fat wallet is gone and can't find a good source replacement.
Reply Helpful Comment? 1 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2007
L6: Expert
1,175 Posts
144 Reputation
Original Poster
#5
Quote from wfghost
:
Which bank did you go with. Interested in a heloc but fat wallet is gone and can't find a good source replacement.

I went with a penfed interest only HELOC. They did an assessment of value that was close enough to my estimate that I went with that amount vs paying anything for an appraisal. It was recently at 5.5% interest Though it can change 4 times a year. Otherwise it was smooth. I emailed all the docs they asked for and ultimately an attorney they selected and paid for met me for a 10 minute signing at my work. It was extremely smooth and I've paid not one cent and there is no annual fee
Reply Helpful Comment? 1 0
This comment has been rated as unhelpful by Slickdeals users
Joined Jan 2008
L6: Expert
1,435 Posts
659 Reputation
#6
When trying to do what makes sense, don't get caught up in the numbers. It's the cash flow that has to work out.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Feb 2014
L2: Beginner
44 Posts
18 Reputation
#7
A HELOC on your primary home IS tax deductible if you use the HELOC funds to invest in an investment property. It is the use of the HELOC money that matters
Reply Helpful Comment? 1 0
This comment has been rated as unhelpful by Slickdeals users
Joined Aug 2014
L4: Apprentice
421 Posts
26 Reputation
#8
Quote from Rhizzlebop
:
I went with a penfed interest only HELOC. They did an assessment of value that was close enough to my estimate that I went with that amount vs paying anything for an appraisal. It was recently at 5.5% interest Though it can change 4 times a year. Otherwise it was smooth. I emailed all the docs they asked for and ultimately an attorney they selected and paid for met me for a 10 minute signing at my work. It was extremely smooth and I've paid not one cent and there is no annual fee
Thanks I've been leaning towards them since they have been great with my auto loans. How long was the process?
Reply Helpful Comment? 0 0

Sign up for a Slickdeals account to remove this ad.

This comment has been rated as unhelpful by Slickdeals users
Joined Aug 2014
L4: Apprentice
421 Posts
26 Reputation
#9
Quote from Surfcaster
:
A HELOC on your primary home IS tax deductible if you use the HELOC funds to invest in an investment property. It is the use of the HELOC money that matters
What about remodeling and purchase of a second home not for rental? I essentially want to buy a second home, set it up and sell my original house.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2007
L6: Expert
1,175 Posts
144 Reputation
Original Poster
#10
Quote from Lakee911
:
Probably better to do a cash out refi since the tax laws have changed regarding the heloc.

You'll still need to show that you have a reserve cash supply for mortgage payment in the event that its not rented. I use my retirement account to prove this, but it's only counted at 50%, IIRC.

US Bank was a PITA to work with, but they had the mortgage product that I needed and a good rate. I had bad people all around, but my understanding is that my results were atypical.
Quote from wfghost
:
Thanks I've been leaning towards them since they have been great with my auto loans. How long was the process?
It probably still took a month start to finish. I applied, got email a couple days later asking for info, a couple days alter I provided it.

A week passsed, I followed up and they asked for another doc. I sent it the next day.

Another week to 10 days passed and they emailed saying it was approved, and to schedule a signing. We scheduled that with a quick phone call, and it was set about a week out to meet my schedule.

We signed, and then 2 days alter I got an email that a check order had been placed (free) with some company and I'd be getting them in a few days. I got a letter this past week with a couple penfed convenience checks. Still havn't gotten the check order that the email indicated, but its no rush to me.

But I've not paid one cent. I was hoping for a 40K amount, accepted just under 36K which saved me an appraisal.

In 2 years and a day I could close it, and reapply if I wanted and increase to the new then equity amount on the home which will prob be another 15-17K, and not pay a dime from what I understand.
Reply Helpful Comment? 1 0
This comment has been rated as unhelpful by Slickdeals users
Joined Aug 2014
L4: Apprentice
421 Posts
26 Reputation
#11
Quote from Rhizzlebop
:
It probably still took a month start to finish. I applied, got email a couple days later asking for info, a couple days alter I provided it.

A week passsed, I followed up and they asked for another doc. I sent it the next day.

Another week to 10 days passed and they emailed saying it was approved, and to schedule a signing. We scheduled that with a quick phone call, and it was set about a week out to meet my schedule.

We signed, and then 2 days alter I got an email that a check order had been placed (free) with some company and I'd be getting them in a few days. I got a letter this past week with a couple penfed convenience checks. Still havn't gotten the check order that the email indicated, but its no rush to me.

But I've not paid one cent. I was hoping for a 40K amount, accepted just under 36K which saved me an appraisal.

In 2 years and a day I could close it, and reapply if I wanted and increase to the new then equity amount on the home which will prob be another 15-17K, and not pay a dime from what I understand.
Thanks I'll get it started!
Reply Helpful Comment? 0 0
Page 1 of 1
1
Join the Conversation
Add a Comment
 
Copyright 1999 - 2018. Slickdeals, LLC. All Rights Reserved. Copyright / Infringement Policy  •  Privacy Policy  •  Terms of Service  •  Acceptable Use Policy (Rules)  •  Interest-Based Ads
Link Copied to Clipboard