Investment Property HELOCs Come With Terms That Kill the Deal

“you're basically asking for a personal loan with a cool story attached. the lender can't do much with private stock if things go sideways, so they'll price it like there's no collateral at all. if you've got other assets you can pledge instead, that'll get you a way better rate. otherwise just expect something north of 10% and a lot of paperwork. [re: Loans On Private Stock]”

“There are so many "it depends" to answer this question. If this is LLC that is rental property, you could very well qualify to take $25,000 in losses before hitting PAL, leaving you with $70,000 of PAL carryover. Just from the questions your asking, if you don't need to hire a tax preparer, use a software. I recommend freetaxusa.com [re: Passive Loss Disallowed / Schedule E Question]”

“Why not? You can do it with no margin/loans… [re: Real estate or stock market? Let’s do the math]”

“You left out at certain points, and especially if you rehabbed a place before renting it, you can refinance and pull out all of your initial capital to fund another property. [re: Real estate or stock market? Let’s do the math]”

“doubt you can refi for a better rate. [re: 795 credit score, no card debt, own home. How do I make it work harder?]”

“I essentially did the same: LAL to make a fast moving "cash offer" on a home, then got a mortgage. And once our old house sold, used part of the proceeds and other assets to pay off the LAL. [re: Liquidity Access Line with Morgan Stanley]”

“Use asset depletion modelling and get a mortgage. I wouldn’t leverage 50% on a line secured by stocks right now but that’s me. [re: Liquidity Access Line with Morgan Stanley]”

“Get the mortgage for maximum flexibility. You have tax strategies available such as slowly selling stock per year to get lower effective tax rates, or time the selling of stock when you can offset other capital losses. Or maybe the stock doubles and you take out a PAL then to pay off the mortgage. [re: Liquidity Access Line with Morgan Stanley]”

“Just get a mortgage. You’d be riding the edge on being over the 60-65% LTV MS requires you keep in the account. A 10% drawdown would essentially cause a margin call. Get a mortgage, and you can use an LAL for the down payment. Or they have pledged asset down payment, which is essentially similar to an LAL, but the payment is wrapped in the mortgage vs a separate payment like an LAL. [re: Liquidity Access Line with Morgan Stanley]”

“You do realize that liability claims can reach into 7 figures very easily right? Can you actually cover that with a home equity loan? [re: Bought 2 rental properties that will bring in $2,600 to 2,700 a month in income]”

“I used LAL with collateral to pay cash for a home then refinance it with them as an ARM, but your portfolio is too small to get competitive rates for that priced home. LAL is not a sbustitute for a mortgage, just a vehicle to get liquidity. [re: Liquidity Access Line with Morgan Stanley]”

“Ask Morgan Stanley about their Pledged Asset Mortgage. 50% of the portfolio is a lot though. [re: Liquidity Access Line with Morgan Stanley]”

“Shop around. Different places will offer pretty different interest rates. Also, box spreads if you’re not afraid of doing slightly fancier stuff. They’ll get you basically the lowest interest rate the market can bear and the “interest” will be tax deductible regardless of what you do with the proceeds [re: Liquidity Access Line with Morgan Stanley]”

“count it for estate planning, ignore it for mortgage math. bank won't care about a stake in a ranch you can't sell, they want to see cash flow. your net worth on paper is one thing, what actually pays the bills is another [re: Calculating Net Worth]”

“I'm not assuming it's a bad deal. You said it does not cash flow with 20% down and a loan on the rest. You said you needed to force cash flow by putting a higher % down. That is by definition a bad deal. [re: How’s everyone feeling?]”

“beyond rate, look at the total payback amount and how the payments are structured. Daily or weekly debits can crush cash flow even if the headline number looks fine. Thats the thing brokers sometimes gloss over because it doesnt sound as scary as a higher rate [re: Business owners who've used funding brokers, how do you know you're getting a good deal?]”

“I would never touch anything that doesn't cash flow at today's interest rate (30 year fixed) + a 50 bps cushion, including a decent cushion for vacancy, and no major upcoming CapEx. That's in A/B tier areas. C tier and lower needs to generate at least a 20% projected return with no major upcoming CapEx and at least 25% set aside for vacancy, bad debt, and other risk expenses. Deals like this exist and have since ~2024. Many require rehab or value add to stabilize the asset, but once”

“I elected to go with the home equity. I’m working with my brick and mortar bank. Rates are 7.785 and 500 closing cost. Not too bad. That will free up about 600-700 a month. I’m hoping it goes smoothly [re: HELOC vs Home Equity Loan]”

“Secret I tell people is find a local private lender / note investor in your area - they lend because they don’t want to mown the property - they will sell you the properties they take back and finance them to you [re: Lots of flippers in default]”

“Really can’t say why equity is so low. I’d assume they did almost nothing down. Needs a new roof but have a roofer best friend I get them at about cost. [re: Lots of flippers in default]”

“A HELOC would let you borrow against your equity, but is a longer process to get approved, may have closing costs, can cost more since you typically pay interest only during the draw period. You can’t just add cash to your existing mortgage without doing a cash-out refinancing, which may increase interest rate on your entire loan and incur closing costs. [re: Can I use equity to buy a car?]”

“No one mentioned this yet, but you are not really borrowing at 3.5% since it seems like you are based in USD and loan is in Euros. In simplest terms, 3.5% EUR mortgage isn't directly comparable to borrowing at 3.5% in USD. Based on where euro vs usd is trading (now and futures rates), your financing cost is around 5.2% in dollar terms. Could be better or worse over time base don how currency moves. So I would use 5.2% for your estimates [re: Should we pay cash for a dream house abroad or mor”

“I think you move forward with it but call it what it is, a loan. Maybe you'll get pushback on terms and have to negotiate. [re: Think It's Possible To Find A Capital Partner To Buy More Rentals?]”

“Achieve worked out great for me. But that rate from your CU looks fantastic. Is that fixed or is it variable. If it's fixed that's the best i've seen all year. [re: To HELOC or not to HELOC?]”

“Look around for other lenders. Imo you can find better than 7.25%, especially with all the equity. But ya, that's prolly the way to lower it all [re: Coming into money, can't easily recast / refi.]”

“I'm going to be receiving about $140-150k shortly. Ideally I would like to put this toward the principle of my $300k mortgage and recast to get my monthly payment lowered. My goal is explicitly to lower my monthly payment. My mortgage is soul crushing, and I want breathing room to invest, save, make repairs, emergencies, etc - then pay down the principal if everything else is in order. I used a VA loan which means that I cannot recast my mortgage. And a VA IRRL (VA specific refinance system)”

“Sounds like you are in France. Have you really checked the interest-only as doable? We looked at this option too but it is in reality very difficult to make it work. It looks like lenders don’t directly use equity of house for collateral for the mortgage. If assumption is correct and this is in France you may also try to low-ball and buy all cash (20 year 3.5% is difficult for foreigners without steady work income). The market is not too hot and a lot of homes are sitting a long time without get”

“I agree. I’d say the only time that an ARM makes sense to me is if you have the cash to just pay the loan back in full if interest rates are too high at the time of adjustment for it to make sense. Put in other words, these loans are for sophisticated investors, wealthy people, and people who know a large income windfall is likely coming soon. For normal people, the 15 and 30 fix are the most popular for a reason. If you gamble on an arm and lose, the result can easily be foreclosure and bankrup”

“If you can put down 20% do conventional instead of FHA. No MIP/PMI cost [re: Is a 5/5 ARM rate good at this environment ?]”

“serious answer....take on a small business loan after coming up with a business plan for how you will make the money back in x years doing whatever services you can offer. I heard a CPE instructor tell how he began his own practice in the 80's after only 2 years as an employee. it really gets me thinking about what opportunities we are overlooking out of fear [re: Thousands of dollars and hundreds of hours spent studying all for nothing]”

“Saw another comment like this and feel like it should be reiterated. The down payment / interest rate / times have changed is not the issue. The issue is that good deals are hard to come by and won't be found on-market or an agent's "pocket listing". Best way is to do your own marketing direct to seller. If that's not an option or you don't want to, connect with wholesalers who are going direct to seller (and get comfortable with your own underwriting bc there's wil”

“Looking for input if this is a good/appropriate deal. Asking $1m 500k in assets - mostly vehicles - no real estate Revenue is $1.1m/yr - Profit is 333k after 40k owner salary. - Owner works an average of 10hr/week. Owner mentioned 2024-2025 he was out of town for two years and business was consistent with him managing remotely. Still has both leads since then (4 years employed for both). 11 employees, multiple contracts where none are a over 25% of sole income. 17 years in business. Owner is ret”

“Hate it, I know most of y’all’s opinion but who are the best ones yall have worked with and what are the sort of rates now? We do $300-400k rev per month. We want non recourse too. Reason being is that some of our customers are net 45 but to work with some carriers because of their factors we need to have avg days to pay in 30 or less days. We have worked with our customers for years and they just can’t change their payment schedule. Which is why we might have to bite the bullet. My feeling is t”

“If you have 15 years of experience operating apartments and your own construction company, you should be raising capital, not "pulling equity". Start developing your investor network and get in on the GP side. You'll have a smaller equity position, but significantly higher returns and income from fees. [re: Anyone on the institutional side with some strategies for growing from a high 8 figure portfolio to a high 9 figure portfolio?]”

“Hi, I am 30 and considering taking out a home equity loan to make some home repairs. My deck is collapsing and around 12.5k to fix. Various other items in my home are dated and ticking time bombs (20 year old hot water heater and HVAC). I have the funds to replace the deck outright but does not leave me with much emergency funds after. My worry is if I fix my deck (dangerous to be on or around) and something else goes out I will be scrambling to figure something out. I owe 188k and appraised at”

“Homeowners insurance is requiring my partner to repair several items on her house totaling about 50k or insurance won’t be renewed at renewal date. House is worth ~130k, equity is about 70k. New roof, window work, foundation repair, tree trimming, gutters, stuff like that. I had a plan to address each item but not in a 60 day window. I do not own the house. Initially we were looking at a heloc to pay for these repairs. However, her wallet was stolen recently along with her ID, cards, and soc sec”

“We recently moved to put my daughter into a better situation for school after completing a $300k backyard and pool renovation project. I financed the project using our HELOC and do not want to go down that path again. I want to save a portion of my bonus each year to put towards a pool at our new home. What’s the best vehicle to save that cash and help grow the budget? Aside from interest rate on a CD or HYSA, is there anything else I should consider? Assume I need ~$200k (HCOL area) and can sav”

“For a first DSCR, here is what to watch beyond rate. The prepayment penalty is the big one, most DSCR loans carry a 3 to 5 year prepay (often a step down like 5/4/3/2/1), so if you might sell or refi sooner that cost matters more than a small rate difference. Confirm the DSCR they are using and at what rate, because on a two family at $1,975 total rent the ratio can come in tight and that drives your LTV and pricing. Check the reserve requirement, usually six months of payments. On appraisals, n”

“Interest rates are pushing 8% it’s not a buyers (or sellers market for that market.) prices are sky high to boot. [re: At 49, should I buy a house or keep renting? I’m scared of making the wrong decision]”

submitted by /u/blablabor [link] [comments]

“This could work - but unless the money partner is not active - they are viewed as a silent partner. Search for ' SEC Howey test'. Most money partners expect that the refi results in the money partner getting fully cashed out. Possible - but your purchase price plus rehab must be low enough to allow that spread - or the money partner will leave $ in the deal - then asking for all the cash flow until cashed out. [re: Think It's Possible To Find A Capital Partner To Buy More Rentals?]”

“This could work - but unless the money partner is not active - they are viewed as a silent partner. Search for ' SEC Howey test'. Most money partners expect that the refi results in the money partner getting fully cashed out. Possible - but your purchase price plus rehab must be low enough to allow that spread - or the money partner will leave $ in the deal - then asking for all the cash flow until cashed out. [re: Think It's Possible To Find A Capital Partner To Buy More Rentals?]”

“This could work - but unless the money partner is not active - they are viewed as a silent partner. Search for ' SEC Howey test'. Most money partners expect that the refi results in the money partner getting fully cashed out. Possible - but your purchase price plus rehab must be low enough to allow that spread - or the money partner will leave $ in the deal - then asking for all the cash flow until cashed out. [re: Think It's Possible To Find A Capital Partner To Buy More Rentals?]”

“Any place to lock in rates or are all SBLOCs floating adjustable rates? [re: SBloc rates (secure line of credit)]”

“Did any small business owners here have refinanced high-interest business loan using a HELOC, or cash-out refinance. How was the process? Any surprises, challenges, or things you wish someone had explained earlier? submitted by /u/TraditionalTart2175 [link] [comments]”

“My wife and I are about to break ground on an addition on our house. Our current rate is 3.125% so moving at this point for a slightly larger house at more than 2X the monthly mortgage is just nonsensical. The addition will be somewhere around $230k all in (new kitchen, master suite, 2nd living room adding 750 sq feet in total). We currently have $340k in cash/liquid accounts. Some of it is in the market. Some of it is in a HYSA (a whopping 3.1%). We currently have about $190k in equity in our c”

“hit the usual wall. bank wants two clean years of statements and the business needs inventory cash in a few weeks. i know unsecured operating capital costs a lot more than a proper facility. for people who've used both - when did paying up for short money actually beat waiting, stretching payables, or cutting the order? not looking for a lender. just trying to understand the situations where the expensive option is the rational call. submitted by /u/Altinvfinance [link] [co”

“Seconding all of this. Also, talk with your lender for guidance on the numbers. [re: Buying a dry cleaner in a busy area]”

“It’s 1% spread over SOFR, you may be able to negotiate for better rate. [re: SBloc rates (secure line of credit)]”

“How in the fuck are you buying, renovating, and refinancing in this borrowing environment whilst also claiming to not being "particularly strategic"? Wut [re: Anyone on the institutional side with some strategies for growing from a high 8 figure portfolio to a high 9 figure portfolio?]”

“Are they on the deed as well? If it's just you, it's gonna be hard to use your equity. If they are, you probably have options on a HEL or HELOC. The combined rate should be pretty low, whether through your mortgage bank, credit union or other lenders like PNC, Citizens or Achieve HELOC. [re: Loan for home improvement]”

“The refi risk is covered above, so one thing from the lending side. A hard money lender will ask where the down payment came from. If your capital partner's money comes in as a loan secured against the property, most first-lien lenders won't allow it, they don't want a second lien behind them. It usually has to come in as equity in the LLC or as an unsecured loan, and the partner has to be fine with that. Also check the refinance lender's seasoning rules before you count on a fas”

“Well, I would imagine OP has enough equity for a HELOC if the shit really hit the fan. While I agree they should build savings back up, they still have plenty of options in case these emergencies or contingencies do come about. And given their current financial situation, would likely be able to cover that for bit. [re: 44M, married, NJ, started investing during COVID. How am I doing financially?]”

“If I were you... Close the land. But hold of expanding anything. Grow revenue and pay off debt with what you have [re: Opinions as to how you'd close this funding gap]”

“Adjustable rates follow one year treasury +2.75% margin. So they very likely can be at 7% when they adjust. When it comes to ARMs, I think to refinance before they start to adjust, but who knows where the rates will be then. [re: Feedback on loan options]”

submitted by /u/no-look-passing [link] [comments]

“Almost 36% is criminal. 100% look into other options agreed on not doing it. Theoretically for you you can look to other lenders to see if any will work out like best egg or achieve maybe? But good on you for not going with that egregious 36%.”

“Yeah, it's pretty common, it's basically a JV where one side brings cash and the other brings the work. Just get it in writing up front, especially what happens if the refi comes in low or takes longer, and whether the money partner goes on title or just holds a note. A real estate attorney can draft that for a lot less than it costs to untangle later.”

“I’m looking into buying in a new development in Washington state. One of the builder’s preferred lenders is Prime Lending. I spoke with a loan officer from Prime Lending and everything seems really good. I’d never heard of them before and want to make sure I am making the right choice. Anyone have first hand experience with Prime Lending and care to share your thoughts? I’ve searched the sub and most of the posts related to them are several years old. Thanks! submitted by /u/catsandp”