Investment Property HELOC Strategy?

10 Replies

I have a HELOC on my primary residence in Nevada. I'm investing in SFR in Missouri. My currant goal is to a accumulate 10 SFRs, and then reassess.

I'm trying to figure out the best way to get there. I'm currently doing my first BRRRR, and it looks like I'm going to get all of my money back. I really really like getting a cash flowing property that I own 25% equity in, and all of my money back out in 6 months. The 6 month timeline on title before I refinance is the killer, just the way it is though (without really expensive terms). I'm also exploring delayed financing, but those deals don't come easy.

A lender I'm working with offers up to 4 HELOCs, 1 on a primary residence and 3 on investment properties.  The investment HELOCs allow for drawing against up to 60% of the equity in the home.  AND, if you draw 35k or more, the first 12 months of payments (interest only) you only pay 3.5% in interest.

I'm considering either using the BRRRR (or is the the BARRRR method now) and/or delayed financing to acquire another two properties, then switch from buy and holds to flips. I'd use the flip profits to pay off my three investment homes (worth approximately 90k a piece). 270k x 0.6 = 162k. Borrowing 162k for 12 months would only cost me $5,670. You could do a lot of BARRRing or delayed financing with cash like that.....

Is this idea crazy?  I've read a lot of forum posts, and am currently listening to podcast 107 (I'm going in order).  A lot of people talk about how great HELOCs are, but no one has mentioned striving to get as many as possible as soon as possible.  Thoughts?

I cannot remember where it was, but last night there was a great thread (post) about moving heloc money to the LLC and buying the property out of the LLC. The LLC could then do the refi cash out without needing to wait for seasoning. It was late around 1 when I read it, so I may be off base.

The HELOC group I researched for "secondary" homes, I am going to see tomorrow to get all the details. They said there is only a $99 application fee each time I want to pull the money out. I have 3 properties where I can get 75% LTV, as we own them free and clear, looking to do exactly what you said, BRRRR and continue, so long as we can get the HELOC owners to play ball.

At some point this will dry up, it always does, so if you can do it now, enjoy the ride. The idea is not crazy, its sound if you have the equity in the property. Nice job @Pat Jackson

@Jack Bobeck , awesome. Can you post what you find out from that lender and HELOCs. This lender doesn't require a fee to set up the HELOC or draw (just to close before a year or two), however you can only get the HELOC for what you bought the house for, or on the appraisal value after 12 months. 12 months is a killer in my situation.

Yes @Pat Jackson I have spoken with their people on the phone, I am going into a branch tomorrow. They offer both the HELOC and the Home Equity Line. I dont want the HEL, as its like a non-recourse loan and I am on the hook for the term of the loan. I'd rather pull equity bucks and put them back when we do the BRRRR. The monthly payment is interest only at 4.49%. I will keep you posted.

@Jack Bobeck , Thanks! Any idea how long you have to own the property before they will issue the HELOC? What do they base the value on?

Anyone else out there with investment HELOCs, please share!

Do you have the income to scale up to 10? I'm currently facing issues w/ funding cap that is coming faster than me running out of down payment money....

@Matt K. , probably not. But I’ll keep getting approved for a SFR, buying it, and reassessing.

If/when I run into the income cap, I’ll scratch my head, post on BP, and figure it out!

I’ve spoke with a lender who offers portfolio loans on SFH, but the rates are 1% or more higher than conventional mortgages. There are other strings as well.

Originally posted by @Pat Jackson :

Matt K. , probably not. But I'll keep getting approved for a SFR, buying it, and reassessing.

If/when I run into the income cap, I’ll scratch my head, post on BP, and figure it out!

I've spoke with a lender who offers portfolio loans on SFH, but the rates are 1% or more higher than conventional mortgages. There are other strings as well.

Do portfolio lenders not look at DTI? I know how they work in theory, but have been working on maxing out my conventional financing first. Also do you know what type of impact the HELOC will have on DTI when going for next loan?
I'm currently working on figuring out what to do with some equity I have in my SFH in MO. Trying to decide between a cash out refi or HELOC.... I have about 200k left of financing so that kind of puts a damper on things haha and makes me want to do HELOC (but then I have to let funds season..... ).


Do portfolio lenders not look at DTI? I know how they work in theory, but have been working on maxing out my conventional financing first. Also do you know what type of impact the HELOC will have on DTI when going for next loan?
I'm currently working on figuring out what to do with some equity I have in my SFH in MO. Trying to decide between a cash out refi or HELOC.... I have about 200k left of financing so that kind of puts a damper on things haha and makes me want to do HELOC (but then I have to let funds season..... ).

I was told, (though I don't have one of these loans) that this portfolio lender only looked at the numbers. Basically these loans work like a business loan (his words not mine). From what I understand HELOCs count against your DTI, but when you go to refinance, you can agree to a condition where the funds are used to pay off the HELOC. I've never done this either, but I've read that on here. Hope someone else chimes in!

@Pat Jackson I have now purchased 29 rental units in six months using a Heloc. I am getting close to being financially “free”. Yes its possible! I was fortunate to have LOC of $280k in which I will use about $250k of before refinancing and paying it down. I am also looking at moving to a smaller home, pay off the loc, use the remaining balance to buy another home (mostly cash) then open up another Heloc.

It is crazy that I will have my near six figure income mostly replaced within six months-year after the properties are stabilized. Get after it buddy! Good luck!

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