Tag Archive for: lines of credit

For any project you do, you need money. We refer to this collection of money as your money bucket

The money in your bucket comes from two sources: 1) a lender and 2) you.

Both of these areas of funding are going to come together and fill the bucket to finance your project. 

Lenders

This is the part most people think about the most when it comes to real estate investing.

As an investor, it’s important that you’re attractive to lenders. Lenders, as a rule, want to lend you money, but it’s important to understand what they’re really looking for as well as how you can diversify your money bucket to maximize your success. 

Sometimes you need hard money, sometimes you need a bank, sometimes you need conventional loans. Sometimes you just need gap funding. 

Lenders offer a variety of options, and you should shop around to make sure you’re finding the right option that fits your project.

You

When it comes to the part of the money bucket you’re responsible for, there are two important areas for you to consider:

Credit Score

The better your credit, the more options you’ll have. 

Impact of Credit: Banks love clients with high credit scores. The higher the score, the more options they’re likely to offer. 

As with finding a loan, the more options banks offer, the more likely you are to find a great deal.

Personal vs. Business cards: Using personal credit for investing can quickly turn into a problem. 

Using personal credit cards or lines of credit for business projects can drive people’s scores down.

We strongly recommend using business credit cards for your real estate investing. You still should make sure you’re paying everything on time, but that business credit card in your name isn’t going to be reported on your personal credit report.

This keeps your credit score higher as you’re looking for loans.

Lines of Credit: Having a variety of credit lines, and opening those strategically, will help you fill  your money bucket. Lines of credit in business credit cards, HELOCs, etc. can get you more prepared for down payments, earnest money, repairs, and more. 

It’s helpful to have backup lines of credit that are ready for when you need money for time-sensitive deals. 

Fill your bucket and your options. 

Other People’s Money

When trying to fill your money bucket, you shouldn’t overlook your friends and family. 

Look out for real people in your life who are willing to invest in your project. Even if they only want to invest $10K, that can still help you cover your earnest money or smaller payments.

A lot of people are looking for private investments that offer better returns than traditional banks. Working with the real people in your life can make a huge difference in your ability to fund your project.

If you need help with navigating those personal investments, we’re happy to help. We have a lot of experience working with diverse money buckets and know how to keep notes for your financial records so those private loans are correctly accounted for.

Read the full article here.

Watch the video here:

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What should you know before you get a HELOC?

First, know where to go for HELOCs. This is typically local credit unions and large national banks.

But before you call these institutions, make sure you have these 5 things ready:

  1. How much your property is worth.
  2. How much you owe on it.
  3. Align your LTVs. So if it’s a rental property, make sure your current mortgage and your current value is 70-75% or less, or HELOCs are probably not going to be available to you.
  4. What your credit score is. Know what it is and know what it needs to be. Most places will require a minimum 680, but 700 is better. The higher your credit score, the higher your loan-to-value.
  5. What type of property it is. Especially with a rental, know its condition and whether it’s a single-family, duplex, etc.

A final tip on HELOCs: each bank or company will give you a HELOC on between one and three of your properties. So if you want a HELOC on five, ten, or twenty properties, you’ll have to set up accounts at different banks.

As an alternative, you could also look into lines of credit, which span multiple properties.

Help to Get a HELOC (and More)

We want to make it easier for you to get the best, cheapest leverage possible for your investments.

If you have any questions or have a loan you’d like us to price out, reach out to us at Info@TheCashFlowCompany.com. If you just want more information on real estate investing, you should check out the videos on our YouTube channel.

Read the full article here.

Watch the video here:

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A business credit card for real estate investing: do you really need it?

There are two major things a real estate investor needs: easy, fast, and cheap funding and a good credit score to secure that funding.

Using a business credit card as a real estate investor can be the answer to both of these problems. Let’s go over exactly how a business card could change your career.

The Credit Benefits of Using a Business Credit Card

So, why business credit cards? They’re a no-brainer alternative to using your personal cards for your real estate investments.

Most real estate investors use a credit card to pay for the expenses involved in fixing up properties. Doing this, however, raises your balance, which increases your usage. Usage makes up 30% of your credit score, so keeping high balances on your personal card can significantly lower your score.

It’s important to get all investing expenses off your credit. It not only impacts your business, but it impacts your personal life, too. When you need a personal mortgage, or a new car, or a boat… Your lender will check your credit, and they’ll see the bad score if your usage is out of whack from your business.

A business credit card solves your credit problems in two ways:

  • It helps your credit score. Moving these balances onto a business card takes them off your personal credit. Business credit won’t impact your personal score. This will allow you to get better outside funding.
  • It’s a form of fast, easy, cheap funding. It still allows you the convenience of a credit card – and sometimes at a better rate.

The “best” business credit card for a real estate investor is one that does not show up on your personal report.

The Importance of Credit Score in Financing

In all financing, your credit score is the main driving force. Credit score decides:

  • How many lenders will offer you money
  • Your loan-to-values
  • All terms and rates.

By raising your score, you get better financing. Better financing opens up more options for buying deals – you have more money available to you, plus more flexibility and speed in getting that money to buyers.

The business credit card is the simplest way to make that credit score jump for investors.

Business Credit Card vs Corporate Credit

Business credit cards are not like corporate credit.

You can apply for a business credit card and have it back in close to a week. Corporate credit cards are a bit harder. It involves building corporate credit and going through Dun and Bradstreet – which all takes months or years.

Business credit cards are easy, fast, and can be used every day. All you need is a business, and business name, a bank account, and a decent credit score. (Need to lower your usage to improve your score before you get a business card? Ask us about a usage loan.)

As soon as you get a business card, you can start using it to pay for contractors and supplies, which will free up your personal credit cards and raise your score.

Business Credit Card vs Personal Credit Card

One main difference between a business and personal credit card is that a personal one reports on your score and the (right) business one doesn’t.

For a personal card, you must keep your balance less than 30% of your limit. On a business card, you can max it out. In fact, credit card companies actually like when you use more of your business’s limit, and they’ll give you more credit for doing it.

Using a lot of credit is actually a benefit on the business side.

Making Real Estate Investing Easier and More Profitable

Our primary focus is making investing easier on the funding side. There are many ways to fill your “money buckets,” whether it’s business credit cards, HELOCs, real people’s money, or loans.

We want to help you with all of it. Reach out at Info@TheCashFlowCompany.com for more step-by-step help on business credit cards and other valuable funding sources.

You can also check out our YouTube channel for more info on real estate investing and funding.

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If you want to buy properties quickly… here’s how to use a HELOC.

A HELOC allows you to buy properties with cash, without having the actual cash. So how does this work to buy properties with a HELOC?

Once you’ve set up a HELOC, you could go into the bank at any time and ask them to draw the money out or wire it.

Within hours of finding a property, it’s possible to go under contract, set up a closing, fund it, and own it. Once you own the property, you can always refinance later into a more traditional loan to pay back what you took from your HELOC.

This allows you to compete with cash buyers because this is exactly how they do it. Using a HELOC in this way gives you the power to get in front of the line.

How to Use Small HELOCs

HELOCs are a valuable tool in any investors’ toolbelt. It’s one of the easiest ways to ensure no good deal will get away from you.

Even if your HELOC isn’t big enough to fund the purchase of the whole property, you could still use it as a down payment. This way, you might not need to wait for lender approval to close.

Even if it’s not purchasing the whole property, maybe it’s putting the money down. So you don’t have to wait for your lender. You don’t have to figure out if they’re going to approve you or not.

How to Use Big HELOCs

If you want more HELOC power behind your investing punch, there are a few things to keep in mind.

First, if you own multiple properties, you can put HELOCs on each of them. More lines of credit equals more cash available to you.

Second, you want to ensure you’re getting the best HELOCs. What makes HELOCs the best for real estate investors who compete with cash buyers? There’s one thing: high loan-to-values.

You’ll want to shop around to get the maximum amount you can from these lines of credit. Money is power in real estate investing, so choosing the HELOC with an extra point in fees shouldn’t distract you from your highest LTV option.

The best lenders will be able to give you 70-75% LTVs on your rental properties and 80-85% on your owner-occupied home.

Where to Find the Best HELOC

So where do you find the best HELOC? It’s something you’ll have to do a little research on.

If you don’t want to do your own research, we do it every month. We call all the banks and credit unions in our markets to find out who has the best loan to values, lowest rates, and easiest qualifications. Reach out at Info@TheCashFlowCompany.com if you want this list!

Read the full article here.

Watch the video here:

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HELOC and a bank line of credit… which is better for your investments?

So what’s the difference between a true bank line of credit for your business and a HELOC?

Let’s go over 5 key differences you should know.

1. Qualifying for a HELOC or Bank Line of Credit

Typically with a bank line of credit, which is a line of credit on one or multiple properties, you could have one line of credit that covers all of your properties or just part of them. You have that flexibility. But, in order to qualify, you also have to provide all the paperwork, taxes, and everything a bank usually requires.

For a HELOC, qualifying is usually just as simple as getting an estimate or value on your property, and having a good credit score. There is often minimal paperwork and little concern about your income.

2. Applying

One major benefit of a HELOC is once you get one, they’re good for a set draw period. That period is usually 5 or 10 years. So once you get it, you have it at your disposal for that timeframe. You can use it over and over.

A bank line of credit that goes through your business is less set-it-and-forget-it. Some banks will want to look at your financials every year, and some every two years. You’ll have to re-qualify every couple of years.

With a bank line of credit, you have to bring in your paperwork every few years, so you have to be sure your business stays profitable. They also re-evaluate the property’s value, which can be pro or con depending on the market.

3. LTVs on a HELOC or Bank Line of Credit

What are they going to lend you? A HELOC on a non-owner-occupied property usually maxes out at 70% of your equity. In owner-occupied, that could be up to 80%.

Depending on your credit and your properties, a bank line of credit will probably have a maximum LTV of 75% average overall on the properties.

The LTVs on these two lines of credit aren’t that different. It’s more important that, whichever option you go with, you shop around to maximize your loan-to-value.

4. Costs

Typically, a HELOC costs a few hundred dollars to open up. So each property you put a HELOC on will have its own fees (the couple hundred bucks) and requirements every time. But remember, this lasts for 5-10 years, or until whenever you refinance it.

The cost for a bank line of credit will be somewhere between one and one and a half percent. They may need some appraisals to approve it. And remember – since it’s only a 1-2 year limit on bank lines of credit, these charges will happen at least every 2 years.

5. Source

Now, the biggest benefit of a bank line of credit: it’s in one source.

For HELOCs, you have a small amount available on each property. So if you need a large amount, you’ll have to go to each bank or credit union and pull out the amounts. You’ll have different accounts at different banks that you’ll have to manage the payments on. You may have two HELOCs, or you might have 10 – and you might have to put all 10 together to get enough funds for what you need.

Read the full article here.

Watch the video here:

https://youtu.be/BXvXb0BpyPo

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Setting up this simple funding source helps you compete with cash buyers in your market.

Cash buyers always swoop up the best deals. Why? Wholesalers and realtors contact them first because they know they’ll get a fast, simple close with these people.

How can you even begin to compete with cash buyers in the real estate investing market? HELOCs are a secret weapon that not enough investors are tapping into.

A HELOC allows you to play the same game. Let’s go over the details.

How to Use a HELOC like Cash to Compete with Cash Buyers

A HELOC allows you to buy properties with cash, without having the actual cash. So how does this work to buy properties with a HELOC? 

Once you’ve set up a HELOC, you could go into the bank at any time and ask them to draw the money out or wire it.

Within hours of finding a property, it’s possible to go under contract, set up a closing, fund it, and own it. Once you own the property, you can always refinance later into a more traditional loan to pay back what you took from your HELOC.

This allows you to compete with cash buyers because this is exactly how they do it. Using a HELOC in this way gives you the power to get in front of the line.

Small HELOCs

HELOCs are a valuable tool in any investor’s toolbelt. It’s one of the easiest ways to ensure no good deal will get away from you.

Even if your HELOC isn’t big enough to fund the purchase of the whole property, you could still use it as a down payment. This way, you might not need to wait for lender approval to close. 

Even if it’s not purchasing the whole property, maybe it’s putting the money down. So you don’t have to wait for your lender. You don’t have to figure out if they’re going to approve you or not. 

Big HELOCs

If you want more HELOC power behind your investing punch, there are a few things to keep in mind.

First, if you own multiple properties, you can put HELOCs on each of them. More lines of credit equal more cash available to you.

Second, you want to ensure you’re getting the best HELOCs. What makes HELOCs the best for real estate investors who compete with cash buyers? There’s one thing: high loan-to-values.

You’ll want to shop around to get the maximum amount you can from these lines of credit. Money is power in real estate investing, so choosing the HELOC with an extra point in fees shouldn’t distract you from your highest LTV option.

The best lenders will be able to give you 70-75% LTVs on your rental properties and 80-85% on your owner-occupied home.

Where to Find the Best HELOC to Compete with Cash Buyers

So where do you find the best HELOC? It’s something you’ll have to do a little research on.

If you don’t want to do your own research, we do it every month. We call all the banks and credit unions in our markets to find out who has the best loan to values, lowest rates, and easiest qualifications. Reach out at Info@TheCashFlowCompany.com if you want this list!

5 Things To Do Before You Get a HELOC

So if you want to compete with the cash buyers, how do you start with getting a HELOC?

First, know where to go for HELOCs. This is typically local credit unions and large national banks.

But before you call these institutions, make sure you have these 5 things ready:

  • How much your property is worth.
  • How much you owe on it.
  • Align your LTVs. So if it’s a rental property, make sure your current mortgage and your current value is 70-75% or less, or HELOCs are probably not going to be available to you.
  • What your credit score is. Know what it is and know what it needs to be. Most places will require a minimum 680, but 700 is better. The higher your credit score, the higher your loan-to-value.
  • What type of property it is. Especially with a rental, know its condition and whether it’s a single-family, duplex, etc.

A final tip on HELOCs: each bank or company will give you a HELOC on between one and three of your properties. So if you want a HELOC on five, ten, or twenty properties, you’ll have to set up accounts at different banks.

As an alternative, you could also look into lines of credit, which span multiple properties.

Help on HELOCs and More

We want to make it easier for you to get the best, cheapest leverage possible for your investments.

If you have any questions or have a loan you’d like us to price out, reach out to us at Info@TheCashFlowCompany.com. If you just want more information on real estate investing, you should check out the videos on our YouTube channel.

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How Does a HELOC Work?

Categories:

What is it, where can I put one, and how does a HELOC work?

The amount of HELOCs in the US increased by 30% from 2021 to 2022. Why?

It can be some of the most flexible, least expensive credit for many people – especially real estate investors.

But how does a HELOC work? Let’s go over the basics.

What Is a HELOC?

A HELOC is like a big line of credit based on the equity you have in a piece of real estate. You can think like a big credit card on a property.

If a property you own is worth more than the amount you owe on it, then you could be eligible for a HELOC. You can use this line of credit for anything you want.

This line of credit is typically in second position. It works similarly to a credit card in the sense that you can use it and pay it off over and over.

How Does a HELOC Draw Period Work?

The draw period is the timeframe the credit union or bank allows you to use the line of credit. They typically offer a 5 or 10-year draw period. Within that period of time, you can borrow money and pay it back over and over.

Once the draw period ends, you can’t use the HELOC anymore – you just have to pay it off. It stops being a line of credit and now acts like a fixed mortgage you have to either:

  • Pay off over time.
  • Refinance into a new HELOC with a new draw period.

Can I Only Have a HELOC on the House I Live In?

You can do a HELOC on both your owner-occupied residence and your rental properties.

A few things to keep in mind:

  • A HELOC doesn’t work on a flip – but it does on a completed rental property.
  • The loan-to-value on a rental HELOC will be less than one on your own home.
  • Some investors have 5-10 HELOCs on different properties. It’s a common strategy.

Read the full article here.

Watch the video here:

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The HELOC FAQs we hear most often from real estate investors.

Over our 20+ years in the business, we’ve helped many investors get correctly set up with HELOCs.

Leverage is your best friend in real estate, and a home equity line of credit can be some of the quickest, most flexible money available.

Let’s go over the 8 most frequently asked questions we get about HELOCs.

HELOC FAQs #1: What Is a HELOC?

A HELOC is like a big line of credit based on the equity you have in a piece of real estate. You can think like a big credit card on a property.

If a property you own is worth more than the amount you owe on it, then you could be eligible for a HELOC. You can use this line of credit for anything you want.

This line of credit is typically in second position. It works similarly to a credit card in the sense that you can use it and pay it off over and over.

HELOC FAQs #2: What’s the Draw Period on a HELOC?

The draw period is the timeframe the credit union or bank allows you to use the line of credit. They typically offer a 5 or 10-year draw period. Within that period of time, you can borrow money and pay it back over and over.

Once the draw period ends, you can’t use the HELOC anymore – you just have to pay it off. It stops being a line of credit and now acts like a fixed mortgage you have to either:

  • Pay off over time.
  • Refinance into a new HELOC with a new draw period.

HELOC FAQs #3: Can I Only Have a HELOC on the House I Live In?

You can do a HELOC on your owner-occupied residence, but you can also do one on your rental properties.

A few things to keep in mind:

  • A HELOC doesn’t work on a flip – but it does on a completed rental property.
  • The loan-to-value on a rental HELOC will be less than one on your own home.
  • Some investors have 5-10 HELOCs on different properties. It’s a common strategy.

HELOC FAQs #4: Where Do You Get a HELOC?

If you’re an investor, the number one place to look for a HELOC is credit unions. Next, is national banks. Those are the two best resources for HELOCs.

HELOC FAQs #5: What Should I Look For When Shopping for a HELOC?

The main thing you should look for in a HELOC is loan-to-value (LTV).

As an investor, you don’t need to worry much about rate – what you borrow will be paid off with your projects. Plus, a HELOC interest rate will be lower than most other forms of leverage available to you.

You also don’t need to be too concerned with the draw period. You can refinance your HELOC at any time.

Your main concern should always be maximizing the amount you can get. When shopping around, ask about LTVs.

HELOC FAQs #6: Are HELOCs Risky?

Are they dangerous? Is there a big risk in taking out a HELOC? The answer is yes and no.

It’s the same as any other line of credit. If you use it wrong (for personal use, living life, etc.), the debt accumulates with no way to pay it off. This becomes a burden not only for your credit but also for your home.

However, used correctly, HELOCs are a low-risk, high-value tool. Use them for a real estate project, then pay them off right after your project sells or refinances.

HELOC FAQ #7: Can I Do a HELOC on a Free and Clear Property?

Yes, you can take out a HELOC on a property you own free and clear.

A HELOC comes in first or second position (sometimes third, from some banks). So if you own your home, or a rental property, with nothing owed, then the HELOC will come in first position.

HELOC FAQ #8: What Can I Use a HELOC for in Investing?

You could use a HELOC for almost anything in real estate investing:

  • Down payment
  • Closing costs
  • Carry costs
  • Rehab/construction expenses
  • An entire property, if the line of credit is large enough.

A HELOC is some of the easiest, fastest, most flexible money you can get. Your greatest limitation is the LTV of the HELOC.

Get a Line of Credit for Real Estate Investors

Want a personalized list of the best HELOCs for you?

We’ve reached out to hundreds of credit unions and banks to find the best, highest-LTV HELOCs on the market.

Reach out to us at Info@TheCashFlowCompany.com to get this report.

You can also download this free checklist of questions to ask lenders to get the best deal on a HELOC.

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What HELOC draw period should you choose?

An important consideration when you’re shopping for a HELOC is the draw period.

This period is how long you can use the line of credit before needing to pay it off. During this draw period, you can take money out, pay it back, then take it out again, over and over.

HELOC Draw Period Options

Most HELOCs come in two different draw periods: either a 5-year or a 10-year. The longer the draw period, the more flexibility you have.

However, we still recommend setting yourself up with the longest draw period available to you. When you need to refinance, but you’re stuck in a down market, you’ll probably get worse terms on your new HELOC. A longer draw period gives you more control over a better refinance.

Refinancing a HELOC

You’re able to refinance a HELOC at any time. In fact, we recommend searching for better HELOCs every 1-3 years. If you refinance before your draw period ends, then that period doesn’t matter as much.

So, when you start the process of getting a HELOC to buy an investment property, set it up to be long-term. Even if you choose to refinance, you should still look to start with the highest LTV and longest draw period possible.

More Info on Using a HELOC as a Real Estate Investor

Want more information on how to talk to banks when looking for a HELOC to buy an investment property? Download this free checklist.

If you have any other questions, you’re always welcome to reach out at Info@TheCashFlowCompany.com, or check out our YouTube channel for more tips on real estate investing.

Read the full article here.

Watch the video here:

https://youtu.be/25VFJx66yZ8

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3 things you need to know when you start shopping for a HELOC to buy an investment property.

For 23+ years, we’ve worked with thousands of investors and funded over a billion dollars in loans. Over and over, we find the following to be true:

Real estate investors who are set up right with financing – HELOCs, business credit cards, real private money – are the ones who succeed.

In this post, we’re going to zoom in on using a HELOC to buy an investment property. Here’s what you need to look for to get the best HELOC for your investing needs.

HELOCs – The Basics

A HELOC is a Home Equity Line of Credit. Oversimplified, this means you can get credit from the bank based on how much of your house is paid off.

A few things to note about HELOCs generally:

  • They can be on either your primary residence or your rental properties.
  • Real estate investor can benefit from taking out as many HELOCs on all of their properties as they can.
  • They provide easy, flexible access to funds for all areas of your investing.
  • A HELOC can be used for:
    • Down payments
    • Earnest money
    • Closing costs
    • Carry costs
    • Rehab costs – material, contractors, or other bills
    • Buying a property outright, if the line is large enough

There are a couple rules of thumb we follow and questions you should ask when you start asking banks for a HELOC. Let’s go over the top 3.

1. LTV on a HELOC to Buy an Investment Property

The #1 consideration when you start looking for HELOCs, by a landslide, is the loan-to-value.

LTV should be your priority for one simple reason: the more money you can get, the more you can do with real estate investing.

Depending on the property type, you’ll find that your bank or credit union will give you an LTV of somewhere between 70 and 90% in this market. In other markets, they’ve gone up to 100% loan-to-value.

Example of an LTV on a HELOC

Let’s say you own a property worth $400,000. You found a credit union that will give you a 70% LTV on a HELOC to buy an investment property.

Here’s the simple calculation:

$400,000  ×  .70  =  $280,000

So, they’ll allow $280,000 in a HELOC on that property.

If they offered an 80% LTV on the same home, then you’d get a HELOC with $320,000. At 90% LTV, you’d get $360k.

But What Is CLTV?

However, HELOC LTVs are a bit different than typical loans – after all, there’s already a first lien or mortgage on the property.

In this case, they look at a combined loan-to-value (CLTV) instead.

As an example, let’s say that property worth $400,000 has a mortgage that’s $270,000.

So here’s what the credit union will do for a CLTV:

  • They know their 70% LTV would give you $280k.
  • But since you still owe $270k, they’ll subtract that amount from your available LTV.
  • Therefore, you’ll end up with $10,000 for a HELOC.

Maximizing Your LTV

This is why LTV is so important for a HELOC. The higher the LTV, the more available funding you’ll have to put anywhere in your real estate deals.

In our previous example, the 70% LTV only gave you $10k in your HELOC. The same property with an 80% LTV would get $50k. And 90% would leave you with $90,000 to use on a HELOC – even with the mortgage still on the home.

It’s essential to make sure you’re working with an institution that will give you the maximum loan-to-value to get more flexibility in funds.

2. Draw Period on a HELOC to Buy an Investment Property

The second consideration for a HELOC is the draw period. This is how long you can use it like a line of credit before needing to pay it off.

During this draw period, you can take money out, pay it back, then take it out again, over and over.

Draw Period Options & Refinancing

Most HELOCs come in two different draw periods: either a 5-year or a 10-year. The longer the draw period, the more flexibility you have.

Also, you’re able to refinance a HELOC at any time. We recommend searching for better HELOCs every 1-3 years. If you refinance before your draw period ends, then that period doesn’t matter as much. 

However, we still recommend setting yourself up with the longest draw period available to you. When you need to refinance, but you’re stuck in a down market, you’ll probably get worse terms on your new HELOC. A longer draw period gives you more control over a better refinance.

So, when you start the process of getting a HELOC to buy an investment property, set it up to be long-term. Even if you choose to refinance, you should still look to start with the highest LTV and longest draw period possible.

2. Interest rates for a HELOC to Buy an Investment Property

The third important consideration when looking for a HELOC is the interest rate. In other words: how much will it cost you to borrow from this line of credit?

Typically, HELOCs are based on prime plus a number. That “plus” number is where the banks make the profit. Almost all banks use prime as their starting point, then they add a factor. They add either one, two, or three to prime to determine your rate. 

Locking in a Fixed-Rate

We recommend looking for a fixed rate for more than a year. We’ve been locking people into five-year fixed rates, and a few years ago, we could offer a 10-year fixed.

Adjustable rates can be a little misleading. Some banks might offer you a prime minus 5 just to get you in. It’s a bit like if a credit card gave you 0% interest up-front, then jacked it up once you get comfortable with it.

Banks try this strategy because they know that once you get a HeLOCK, you’re less likely to refinance out and stay with the higher adjusted rate. This is another reason why we think you should always be on the lookout for better HELOCs to refinance into.

More Help on Getting a HELOC to Buy an Investment Property

These are the three main things to ask about when you’re looking for a HELOC for real estate investments:

  1. Loan to value. The most important. You want to maximize what you can get.
  2. Draw period. You want the flexibility of a 5-year or longer draw, but always look to refinance.
  3. Interest rate. You want a fixed rate so you’re safe despite turbulent or declining markets.

Want more information on how to talk to banks when looking for a HELOC to buy an investment property? Download this free checklist.

If you have any other questions, you’re always welcome to reach out at Info@TheCashFlowCompany.com.

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