at what point does it make sense to use a heloc on an investment property
would you use one to buy the property cash (house is worth $50k) not a lot of room for appreciation, but the rents make sense for me to sit and hold it.
just be cautious when it comes to using these. ensure you've got a plan to pay that balance back in a relatively quick fashion as most HELOC rates can fluctuate which could make the numbers suddenly not work.
i've leveraged mine in instances where i'm doing a BRRR and i want the deposit for a private money loan. i'm not using it as my downpayment and leaving it out there for a long period of time.
just be cautious when it comes to using these. ensure you've got a plan to pay that balance back in a relatively quick fashion as most HELOC rates can fluctuate which could make the numbers suddenly not work.
i've leveraged mine in instances where i'm doing a BRRR and i want the deposit for a private money loan. i'm not using it as my downpayment and leaving it out there for a long period of time.
@Joseph Lombard The HELOC is best described as personal short term financing. It's an expensive bridge to value add, flip RE, or close on a deal all CASH. Savoy investors use them for additional fire power when buying deals. Nobody leverages a HELOC and pays on them for long periods of time.
"Would you use one to buy the property cash (house is worth $50k)" - Absolutely, as long as you know you can qualify/source/secure conventional financing. Preferably you can add value OR buy below market. If you buy a property for $50k and the market value is $50k what's the point?? The risk of pulling equity from _____ is not worth buying that property. That's not a good deal. Command a better price or don't use a HELOC to fund it. Cheers.
The rates on investment loan HELOCs are higher than the rates on the primary residence. I'd rather have a fixed rate on my investment properties vs a variable rate.
I do have a ton of equity in my personal residence, and it would be cheaper to draw from my house equity to buy a fixer house, fix it and refi or fix it and rent, vs getting a hard money loan. I would use my equity in my house for a short term purpose with a quite sure outcome of paying off the line.
On the other hand, I would use a BLOC in the name of my business for deductible financing, that won't clutter up and impact my personal FICO score.
We offer investment helocs! Like the previous comments it just comes down to if it makes sense or not. I do these quite a bit for investors. They also use automated appraisals so can be as quick as 5 day fundings. Shoot me a message it you have any questions, happy to help!