My wife and I recently started investing in some rentals. We`purchased two homes; one last April, the other in June. We went conventional 30 year with 20% down on both. We used our home equity line to finance the 20% (to save on PMI) We put 18K down on the first property and when we went to buy the second, the bank would only give us a equity line for 10K in the first house, What gives? surely there is a better way to do this! BTW, the equity lines were ARM’S.
Anyway, we are missing good deals on rentals because we are fresh out of money to put down.
how was ur credit by the time u got to the 2nd equity line? and lenders usually only allow a cash out or equity line of up to 90% of the equity. in TX on homesteads it’s only 80%. was ur DTI ratio too high?
beacon scores 720 I think, dti was in the thirties. I have been told that I should have shopped around for a better deal, that the arm on the equity line was a slap in the face since we put so much down., any other opinions? We were thinking of refinancing to an interest only loan and generate a higher cash flow for about five years and then selling both, we are spinning our wheels at this point as we are barely breaking even on the cash flow.
tarheel, you have to realize that non-owner occuiped always coming at a higher price/rates and more restrictions than primary resident stuff. Heck, getting lines of credit on NOO has gotten a lot easier in the last few years. In general LOC are almost always adjustment; an “equity loan” is usually the term people use for fixed rate. Now even some LOCs have a “partition” feature that allows you to lock some portion into a fixed rate.
I think you need to have more open discussion with your banker. They should be happy to explain why they can only offer your certain amts or rates; to them its just numbers on the page and where your financial profile falls, but at the same time if you communicate your needs they may have other programs available to you.
Thanks for the new perspectives. The equity line was on our primary residence (27K) we used 18K of that to buy our first property which we then got an equity line on to buy the second. We were only given 10K equity line on the first property we put 18K down on, (90% would be 16,200.00 ???). Anyway, we’re not taking it personal, we are just getting our feet wet with some management experience with the intentions of investing ful time in the next year or so. We both have good day jobs which we plan to keep but we have realized early on thank goodness that rentals (especially the way we financed) is not the route we want to go in the short term. I will have my brokers licence in april. I am thankful I found this site as there seem to be alot of very nice well informed people on here so thanks all who replied! Any suggestions from anyone about a refi or a different way to structure so we can buy more property, there are a ton of nice rentals available at really good prices. Thanks