1. How difficult is it to obtain a home equity loan (HEL) or home equity line of credit (HELOC) today, in the midst of the country’s current financial crisis?

Great Question. While it has become far more difficult to get home equity loans and lines of credit, the process is still relatively simple. There are many banks and credit unions that lend their own funds out (not Fannie/Freddie type loans). These banks and credit unions need to lend to keep their doors open. Without loans, the banks can not make money and will therefore not be able to pay salaries or show shareholders profits. It’s imperative that banks lend in order to stay alive. Provided that the homes have accurate appraisals and strong borrowers, banks love to make loans to these folks. I’ve put my investors in touch with banks that provided 2nd mortgages consistently. Even in this market we are finding loans available based on equity. This year I took out 3 home equity loans that were based on 90% LTV’s on non-owner occupied properties. That’s amazing for this market, but we find them consistently. When one bank changes programs, we often find another that will step in.

2. What extra restrictions have lenders added? What is the extra or more stringent criteria they’ve imposed upon loan applicants?

Lenders have added seasoning issues and a whole slew of new requirements. The most stringent criteria I’ve seen is on the appraisal end of the business. I’ve heard of banks needing comps that are within 3-6 months old within 1 mile of the subject property. This is something we regularly provide our clients, but it is certainly overkill in my mind. Sometimes you may need to go past 1 mile to find 6 or 7 accurate comps, however we consistently find this data for our clients.

3. Is it even worth pursuing a HEL or HELOC today? Why/why not?

Yes, there are great programs out there and rates are dropping.  It’s a great time to borrow and take advantage of this market. Homes are available at 40 - 60 cents on the dollar, there is no better time to buy than when panic has flooded the market.

4. For which type of candidates and under what type of circumstance
(ie, seeking a home remodeling) would you recommend a borrower apply for one
of these loans?

For investors I would suggest getting a 2nd mortgage for construction or providing replenishment to your funds once construction is done. Investors with good credit and income can borrow from banks and get incredible deals in this market.

5. Under what conditions/scenarios should you avoid a HELOC? Under what conditions/scenarios should you avoid a traditional home equity loan?

I would rarely avoid a home equity loan as it doesn’t make much sense not to have one. If you have available capital, you could always get a HELOC (line) and simply keep the funds available for the times that you may need them. It’s a great way to provide for the future without actually paying interest on the funds.

6. How have home equity loans and HELOCs changed over the years-have these products evolved/improved/streamlined/become more complicated, etc.?

The products have unfortunately become more complicated. In the fast and free days, helocs were pretty easy to get approved, while now it’s a bit tougher, but still available. The process was much faster before, but now it often takes an investor a bit more time to establish a relationship with a bank. I establish relationships with banks on a consistent basis. If you don’t, you’ll never get them to trust you. I would also NEVER default. Once you default or miss a payment, you’ll never get money easily again. It will always be an issue.

7. Where is the best place to apply for a home equity loan or HELOC-a traditional bank/lender? A mortgage lender?

Banks and credit unions. Brokers are not my favorite place to get anything done. I like talking with the decision maker and letting them know that I am a solid credit and someone who takes borrowing seriously. Without those comments, it’s just a numbers game. The less likely that you need money, the more likely they’ll lend to you. Remember, decision makers are people too, if they know you and trust you, you’ll go much farther.

8. Any other thoughts, tips, suggestions on this topic?

Buy foreclosures with commercial finance, it’s much simpler.

Austin is my editor.

The majority of our tenants call us from an ad they saw in the paper.

The cost is equivalent to one month’s rent. You receive a list in MLS, info-line, and craigslist.com, scheduling of all showings, and screenings.

Yes, please check your city for licensing.

Specific things we look for include: minimum 1 year at current employer, no evictions or judgments related to rental property, income = rent * 2.5, and verification from previous landlord of on-time payments.

Currently 33, which includes partnerships, joint ventures, and Josh’s current rental portfolio. The number varies quite a bit throughout the year.

No, because everything can be handled through our management company.

From time to time we acquire properties in these areas however cash flow is slightly worse on higher priced homes. You may think rents are much higher in nicer areas, however that is not always the case.

$70 per unit per month.