From PA. I currently have about 200K of equity in my house. Is it possible/a good idea to use a HELOC for a BRRR deal? I'm a rookie investor with 1 rental under my belt which has about 70k of equity. Open to suggestions!! Thanks!
Very popular strategy, @Bill Rogers. Use your HELOC to buy cash and renovate. Then after the property has been rented out and seasoned, refi to pull out all (or most) of your capital, and pay back the HELOC. It's ready to be used again.
Very popular strategy, @Bill Rogers. Use your HELOC to buy cash and renovate. Then after the property has been rented out and seasoned, refi to pull out all (or most) of your capital, and pay back the HELOC. It's ready to be used again.
Yeah, the underwriting doesn't change, @Bill Rogers. If the bank requires 20% down, then you use your HELOC for that 20%. Always good to have a conversation with your lender and let them know that you plan to use your HELOC for the down payment. Most are fine with it, some aren't since you're essentially 100% leveraged.
Or are you asking about the refi? Not to be pedantic, but with a refi you're not "putting money down," you're "leaving equity in," if that makes sense.
If you have a HELOC on your primary residence and are using it for a down payment or purchase of a rental then is the interest on the HELOC tax deductible?
I used a HELOC to provide the down payment on a duplex, and I would second what @Jaysen Medhurst said: If you are using it as a down payment and still obtaining a mortgage, let the lender know during the process, so it doesn't cause a roadblock part way in. If you are going that route, in addition to the 100% leveraged, the lender for the mortgage will still be looking at DTI, so they'll likely need to see what your payment on the HELOC will be.
If instead, you're using the HELOC to purchase entirely, and then refi, then like @Eric Mielke said, make sure the #'s work, and have a plan to place tenants, get it seasoned, and have lenders lined up for refi since you probably want to pay down/off the HELOC sooner.