HELOC then Refinance (without BRRR)

2 Replies

I've learned a lot about the BRRR stategy, and I have a question about the refinance part of it. My primary residence is paid off, and I have an open HELOC on it. Sometimes I come across deals on MLS (through my realtor) that, when I run them through the BP calculator, will cashflow. Sometimes there are very minor needs to make them rentable (mostly just paint).

My goal is to use my HELOC to appear as a cash buyer offering quick closing in hopes of additional flexibility on price from the seller. Then once the property is rented and generating cash flow, I'd like to refinance using traditional 20% down 30 year term. So I guess it's a BRRR without the repair component.

A couple of questions regarding this:

1. Is there a "seasoning period" on this strategy. Will a lender make me wait a period of time between closing using my HELOC and refinancing?

2. Any flaws in this strategy (other than buying off MLS doesn't get me the most bang for my buck)?

Has anyone had success using a HELOC on primary to pay cash, then refi'ing into traditional financing?

No seasoning, it'd fall under the delayed financing. You'd have 6 mo to finance it and they'd go off appraised value vs purchase price so if you bought smart you'd be able to get most your money back out. Just know, the more you take out the "worse" cashflow is. Granted you'll have less of your money it... but some people get caught up in the cash flow numbers. Also you need to be aware of min loan amounts and make sure the properties fall w/ in that. I think generally speaking that's about 50k min loan.... maybe slight variance regionally. 

If you didn't buy all cash (from HELOC) then you'd have seasoning, 6-12 mo to get appraised price, under that it's purchase price.

You don't need seasoning period under delayed financing exception. Cash and HELOC will be consider same.

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