Author Topic: Looking for Financing Help! - Real Estate Investor  (Read 756 times)

tcnjay

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Looking for Financing Help! - Real Estate Investor
« on: July 17, 2018, 08:02:02 PM »
Hello Fellow Mustachers. Looking for some help with options I currently have to borrow money. I'm sure someone on here knows some good stuff!

Here is my situation:

I own 3 properties out right with no loan/mortgage. (My primary and 2 rentals).

I already have a HELOC out on my primary, which I used to pay for the other 2 rentals. My HELOC rate is 4.5%.

I am looking to pull more money now for other investment properties. I know I can do a investment HELOC at a rate of 6.75% on one of my rental properties but I would hate to do this if I had other options with lower rates.

I also heard of a cash out refi but thought that was only for homes with mortgages on them already?

Thoughts from the group on which financial channel I should pursue?

Thanks!




Papa bear

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #1 on: July 18, 2018, 06:36:52 AM »
You can cash out refi a house that you currently own outright.

Why not go with a conventional mortgage? Or are you making a cash offer to make it more attractive to the seller?


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Mother Fussbudget

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #2 on: July 18, 2018, 03:00:05 PM »
You can get a mortgage on a property at ANY TIME.  In your case, since you own the properties outright, you could decide to take out a loan, and invest the proceeds into other properties.  For rental properties, you can potentially do this for each of your properties. 
Then deduct the mortgage interest as an expense, in addition to deducting the depreciation on your property over 27.5 years (which you're hopefully doing already)

tcnjay

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #3 on: July 18, 2018, 05:22:41 PM »
Interesting...I never knew that. Would you say a regular mortgage on a rental property has better rates than a HELOC on a rental property generally?

Mother Fussbudget

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #4 on: July 19, 2018, 03:18:44 PM »
First, ALL loan rates have been inching up during 2018 thanks to the Fed raising the prime rate.  But remember it's more than the rate - it's the origination fee(s), points, assessments, etc added to the loan that add to total loan cost. 

Whether you should use a standard homeowner mortgage, or use a HELOC (IMHO) depends on loan cost.  Go with the loan that your property 'qualifies for' that has the lowest cost.

BUT... I just gave a peek inside the lender kimono.  EVERYTHING depends on the subject property's condition. 

During the loan process, the lender will usually ask for a property assessment (costing you ~$350), and determine based on the property's condition what loan package(s) it would qualify for.  From generally lower cost to higher cost here...  In general, if your subject project is relatively recent (built after 1980), and is "almost perfect" (ex:  needs only paint, and carpet) it can 'potentially' qualify for an FHA loan.  I try to get FHA loans through my local credit union because the interest rates, points, and loan origination fees are lower.
 
If it's an older home with (for example) aluminum wiring, or something that would disqualify the property from an FHA loan, you may have to go with a commercial loan.  My commercial lender will loan on properties up to an assessed condition of "C6", but if your subject property assessment shows as a C5 or lower, you have to find a different financing option.  Seller financing would be next on *my* list, followed by 'hard money' lenders, followed by an all-cash transaction. 

But again, this is based on *my* experience, and may not reflect what other investors have experienced.

FrugalRealEstateGuy

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #5 on: July 23, 2018, 02:17:42 PM »
If you are finding lots of great deals, you might want to consider wholesaling a property or two. You might be able to build up some equity or pay down the heloc.
As mentioned, you have 2 properties that are paid for, borrow against those. I would be a little more conservative though with your paid off properties. We seem to be close to the top of the market. Depending on where you are located, prices may stabilize or come down over the next few years temporarily.
If you are buying great deals, whether its 4.5 or even 6% with a 65% loan, you will be just fine if there is a little downturn.

kenmoremmm

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #6 on: July 23, 2018, 03:37:44 PM »
i thought per the new tax code that you could no longer deduct taxes on a HELOC for a rental. i'm not up to speed, but recall reading something like that.

genesismachine

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Re: Looking for Financing Help! - Real Estate Investor
« Reply #7 on: July 24, 2018, 05:27:04 PM »
i thought per the new tax code that you could no longer deduct taxes on a HELOC for a rental. i'm not up to speed, but recall reading something like that.

My tax accountant said this is a sort of gray area right now. As long as you're using the HELOC for business purposes and can tie it to a specific property (not just withdrawing cash to sit around for a property you haven't bought/found yet), then the consensus amount tax accountants is that it can be deducted.

But he did say this is liable to change if the IRS clarifies that it does not allow that. Nobody really knows for sure right now as there is not a clear directive to point to.