BRRR method, HELOC instead of Refinance?
First off, I agree with @Brandon Hall, it should be the BARRR method! If you haven't read this article, do so.
https://www.biggerpockets.com/renewsblog/forget-br...
Here's a quick recap on my situation:
My property in Missouri is about rehabbed. Between purchase price and rehab I'll be in ~62k (all cash). The house will comp 85-90k. I'll go with 85k to be on the safe side. It should rent out for $800 a month. When I bought it, I was planning on being on title 6 months, and then doing a cash out refi for 75% of the appraised value ( and getting back more or less what I will have in it). But, I'd have to wait 6 months. And I'd then have a big fat mortgage.
So after 6 months, I can cash out refi, have a mortage, and after PITI, account for property management, saving for cap ex, repairs, etc, I could cash flow $100 a month. I consider this a good deal, having a property with no money left in and netting $100 a month.
However, when I went to speak with Bank Midwest, they offer a HELOC on investment properties. Variables to consider:
1. HELOC amount up to 75% LTV
2. Interest only payments for the first 10 years, first 12 payments 3.49%, after that 4.25%
3. HELOC can be offered immediately after rehab is completed, they do an appraisal that I'm on the hook for.
Isn't this a better deal? I want to acquire more cash flowing properties, and am interested in delayed financing. This way, I will be paying less interest than a mortgage (I can't find an investment mortgage for less than 4.25%), and my property will be cash flowing ~$400 per month instead of $100. Am I missing something?