Refi Vs Heloc BRRRRR Questions

4 Replies

I'm honestly not sure how many R's go in there so I just keep hitting R till it looks good. 

A lot of people talk about taking out a Heloc after rehab to get their cash back out. Assuming I own a property free and clear I was under the impression I had to wait 6 months to go off of the appraised value? Is that just with a refi?

Ryan D. I believe the strategy usually revolves around purchasing a property with all cash or by using a HELOC or line of credit on the initial purchase. You then rehab the property with the same funds and are able to have the property then appraise at a high enough value to get all your money out of the deal. This occurs once you refinance into longer term debt. Then you just do this over and over again. Since you can probably only get 75% or 80% LTV, you need to purchase at a steep discount. Most lenders do require some sort of seasoning period before they will use the new appraised value versus the purchase price. If you find one that doesn't require any seasoning, please let me know :)

@Ryan D.   

Wife and I used this plan when last summer to buy a house. We bought it with an "in house" or commercial loan. The house was a REO sold "as is" and was in no way fanciable Via conventional or FHA. It said on the sales add "cash only" We closed in 2 weeks with our local bank. We then rehabed the property and after 6 months refinanced with a conventional Loan. ( 6 moths and 3 days to be exact)

All that to say... I also wonder if there was a HELOC option that would have been faster?

Take a look at this recent thread, particularly the comments by Joe Villeneuve

 Click here

To paraphrase what Joe said (in-artfully at best)

In order to do a cash out refi into a conventional loan (i.e. fixed rate, longer term) you have to wait 6-12 months for the "seasoning period". However, once the property rehab is completed, you should be able to immediately take a HELOC at 70% of the ARV. This way your cash is now ready to be used for another property.

Once the seasoning period has elapsed, then you do a cash out refi, pay off the HELOC and lock into a long term conventional loan with a loan interest rate.

Originally posted by @Matt Holmer :

Take a look at this recent thread, particularly the comments by Joe Villeneuve

 Click here

To paraphrase what Joe said (in-artfully at best)

In order to do a cash out refi into a conventional loan (i.e. fixed rate, longer term) you have to wait 6-12 months for the "seasoning period". However, once the property rehab is completed, you should be able to immediately take a HELOC at 70% of the ARV. This way your cash is now ready to be used for another property.

Once the seasoning period has elapsed, then you do a cash out refi, pay off the HELOC and lock into a long term conventional loan with a loan interest rate.

 Good summation.  That just about covers the mechanics. The reasons for doing it are long and start with $'s

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