When I buy my first property I want to purchase it all cash with funds from a HELOC.
The Process would go as follows
Buy property with funds from HELOC on primary residence
Immediately go to the bank and get a HELOC on the property so I can pay off the original HELOC that I used to buy it with. So now if another deal comes along my money wont be tied up.
In my eyes the real advantage to doing this is that you dont have to pay any closing costs for HELOC’s, so your using OPM practically for free.
Does anyone see anything wrong with the proposed situation? Do banks offer no seasoning HELOCS? Assume around 700 fico
There are a some no seaoning HELOCs since I been talking to a broker about one myself. However, you need to remember on investment properties HELOC will only lend about 80-90% of the appraisal value. So you need to have some good equity in it. You will not get 100% of the ERV of the home when its NOO purchased.
Though if someone out there knows someone doing 100% HELOC on NOO I would like to hear from you.
Also what is your credit score, that will be a factor and are you going dulldoc, stated on NO DOC
My credit score is not that good right now because im 18 years old and just started building it. I got my first credit card a few months back and plan to get another in the near future. My father and I just got a HELOC together on his residence that has a sizeable equity position in it that Im going to use to buy the houses with. I was added to the title of his house to allow me to be a co-borrower with him on the HELOC at bank of america. Basically im trying to boost my credit score up the fastest I can. Anyone know any other ways to build it fast?
yrush are you saying that you can choose fulldoc, stated or no doc on a HELOC? If so I would have to go no doc in my situation. What kind of rates am I looking at for a no seasoning no doc 80% ltv NOO HELOC with say a 680-700 fico.
Could someone give me some insight into how opening and closing large lines of credit like I would be doing with the HELOC would affect my credit score. Could I expect to my score drop from all the credit inquiries and opening and closing of lines?
Could someone give me some insight into how opening and closing large lines of credit like I would be doing with the HELOC would affect my credit score. Could I expect to my score drop from all the credit inquiries and opening and closing of lines?
Good thing is you can dispute inquires to have them removed, of course Experian and TransUnion are tough but Equifax will just removed them when you call within 5 business days.
So would this whole HELOC on the property to pay off the first HELOC used to buy it not be such a good idea? Im just trying to brainstorm financing ideas right now, any input would be helpful. Maybe I would be better off paying closing costs and going with a no doc conventional loan or rehab loan.
Some of my options are
Buy property with HELOC, do rehab and sell.
Buy property with HELOC, get new HELOC on property to pay off original, rehab and sell.
Buy property with HELOC and get no doc conventional loan to pay off HELOC, rehab and sell
Buy property with no doc loan.
Am I right in thinking that 3 and 4 will involve closing costs and 1 and 2 wont? I want to have the best possible profit margins so that I can either make a larger profit or for example be able to bid that more at an auction and come out with the same profit. help
If you have a large enough HELOC use that., You can get a revolving one that works like a credit card so when you need the money you get it and when you dont you need it the bank has it basically, so you will pay on what your using only. I know they are out there…gotta find them…I think Chase offers them. Actually sometimes its better to goto the big banks for them so check them out, brokers dont make money on HELOC and the big banks can give you credit cards/checks to use I believe. Interest rates are alittle high on them these days since they are based on Prime but good news is i think tomorrow they will drop it 1/4point…YEAH!!!
Another option would be to find a good HML that will give you an open line of credit basically. The funding will be based on the property still at 65-75% LTV but if its a good rehab you will come in there. Many HML will only make you quailfy once for the loan, so when u need money again you just show them the deal and thats all. Of course HML are expensive, but can offer you no payments for 6months but points and interest rate are higher…However when investing, its also availability of funds that becomes a factor. As long as you make your profit margin you want, HML is fine.
Your best deals will come with quick closings so HML or HELOC are better than conventional. You can also use your HELOC as a downpayment, go with conventional financing putting 10-20% down and have a quick close with little paperwork, maybe use a NO DOC loan since your not keeping the property longterm, and extra 2% wont change your profit margins by much. If you plan to keep, always refi when its completed and at max value.
I have a great HELOC with Bank Atlantic but they only offer them on primary residence and its interest only payment at about 7.5%, i love it… Allows for cash in emergencies…
What I do is get my HML, and I use the same pool of 50K i have set aside to carry the loan and rehab funds as needed if i can not get all the money from the HML. Since I have to wait for the draws its good to know i have the funds to move forward and then keep the draw when it comes out since i outlayed the money. I still rather use banks money over mine so any chance i get, i do… You may make less on the deal, but it allows you to do more deals. I once had 4 rehabs going at once this way and with the 50K I was able to float all the loans and rehabs till done…Without that money I would not have been able to do 4 deals at once really…
Thanks yrush you seem to always pull though for the noobs, next time I go to UM to visit my friends ill have to take you out to lunch (and pick your brain!). The HELOC I have is 150k (80% LTV) at 7.75% or 250k (100% LTV) at 9.25% with Bank of America. Your right it is a revolving line, with credit card and checks, the best part is its totally free. Im still reading and learning the basics but it wont be too long before I start posting proposed deals ;D.
Just go slow and learn as you go. You will make mistakes and some will cost you money, we all have along the way. Sorta like when our parents tell us not to do something because when they were our age they did ad screwed up but yet will still do it and screw up.
Also join a local REIA club and network and learn. Many REIA clubs offer mentorships. generally it is worth it especially for new investors.