Starting with a HELOC and flipping to a DSCR Loan — Transcript

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1. 0:00I get a client that calls me, explains
2. 0:02that they want to get into
3. 0:04investment properties. They want to buy
4. 0:06some properties. They want to get cash
5. 0:07flow.
6. 0:08They're thinking about buying maybe a
7. 0:10two-unit, maybe several of them.
8. 0:12And in the initial conversation, what I
9. 0:15explain to them is that we can do that
10. 0:17and we have all kinds of loans that
11. 0:19you you can qualify for that don't look
12. 0:21at your income. They look at the cash
13. 0:23flow from the houses. Most of you have
14. 0:25heard of DSCR loans and that's what I'm
15. 0:27referring to.
16. 0:34But
17. 0:35the requirement for these loans is 20%
18. 0:37down. So, if you're purchasing a
19. 0:40$300,000 investment property or $500,000
20. 0:44investment property, you're going to be
21. 0:46required to bring 20%. 20% of 300 is 60
22. 0:49grand. 20% of 500 is 100 grand. In
23. 0:53addition to that, you're going to need
24. 0:55some closing cost money and you're
25. 0:57probably also going to need some
26. 0:58reserves when qualifying for the loan.
27. 1:00And in many cases, the obstacle for
28. 1:02people is not
29. 1:04wanting to do it or not the cash flow
30. 1:07qualified for it, it's the down payment.
31. 1:10And that's when we look at HELOCs.
32. 1:13If you have a primary residence and you
33. 1:16say your house is worth 600,000 and you
34. 1:18owe 100 or 200,000 dollars,
35. 1:21a good option would be to do an 80 or
36. 1:2490% HELOC. So, if that house was
37. 1:27600,000,
38. 1:2980% of that is 480. And say you owe 200
39. 1:33on your house, you could basically get a
40. 1:35$280,000
41. 1:37line of credit on the house.
42. 1:39What's great about that is you don't
43. 1:41make any payments on that until you
44. 1:43actually pull money out.
45. 1:45But now, if you find that $400,000
46. 1:48investment property and you have to put
47. 1:4920% down, you can take the $80,000, the
48. 1:5320% that you would need from the HELOC.
49. 1:56You could take additional money from
50. 1:58that HELOC to pay the closing cost, or
51. 2:00you could use some of the HELOC and some
52. 2:01of your own money, but it gets you going
53. 2:04in investing, and it doesn't use all
54. 2:07your cash, and if you don't have cash,
55. 2:09you get to use the equity in your house
56. 2:11to leverage it into owning investment
57. 2:13properties.