Most HMLs are investment savvy. Most have been investors for many years. Because of that experience, they understand the realities of risk, and of opportunity costs.
If a HML can’t get a decent return from lending, then it is not worth it to make the loan. If a HML was to go out on a limb to make a “cheap” loan, then it would make more sense for them be investors themselves or else find other opportunities to put there money into.
The loan you want doesn’t exist. Low credit score, high capitalization, Insufficient or unverifiable income stream…that adds up to unloanable by institutional standards. But you can find a broker to shop around for you…fyi- they will all tell you they can find you the money… at the very least associating with a mortgage brker will give you a lot of insight and education into the mortgage biz…it will open your eyes…
HMLs are not expensive if the benefits/reward justifies the cost. The truth of the matter is that the pros, the ones doing this a long time, doing large transaction, and making many transactions will use HMls on occasion when the situation is appropriate. That is they need speed, flexibility, or they are short on cash.
Yes, I would get that 20% to put down on your investment properties out of your paid in full properties. Your credit score may prevent you from finding descent rates on just the heloc or from even finding one. You may have to refinance your paid for properties and take cash out. Most lenders will go to 65% on an investment property. What state are you in?
HML’s are equity investors. If you have equity, you can get a loan. Make a bunch of calls before signing with one. I agree a HELOC may be one good option. I would suggest getting the lowest cost/rate loans you can on all of your properties, and then becoming the bank yourself. If you have a rate of 6% and you can take that $ and invest in trust deeds at 12% that would free up half the $ to invest in new realestate, with your payment being made. You will have to figure out what kind of reserves you need to keep to make you feel comfortable with the added debt. But having equity and not using it is not the smartest investment.
Several of my one time borrowers are now investors. Find a HML in your area that is willing to meet and work with you. Interview several and check references. Remember they work for you, not the other way around. So ask a ton of questions, it won’t take you long to figure out who will allow you to use your equity to make you and the broker/lender/investor money. If they are experienced, good and fair, they will earn the money they make, by making you more.