Is this HELOC/ loan strategy a good one?

4 Replies

I am somewhat new to this and wanted to get some of the pro's input. I have a rental property that I am able to get a HELOC on for $43,850. The APR they are offering is 7.75%, which I think is somewhat high but I'm new so not too sure. Houses around my area average around $150-$180k so I would need a conventional mortgage as well. I do not want to have to pay the HELOC an conventional mortgage together so I am thinking of flipping a house, hopefully done in 6 months and pay them both off and then use the profit to roll into a long term rental. Is this the best rout to take? Any input on this strategy would be greatly appreciated.

If you aren't able to sell the flip, what is your plan B? I don't see any major issues with your strategy, but flipping is always a risk, and you should always have multiple exit strategies in mind. 

If I am not able to sell the flip, I will try and refinance then rent it out. I am trying to build a rental portfolio, but I don't want the HELOC loan eating away at the monthly profit. This is why I would like to flip and try to get money out to pay off the HELOC and have some money for a done payment on a buy and hold without a HELOC and mortgage to pay on it.

Originally posted by @Anthony Reyes :

If I am not able to sell the flip, I will try and refinance then rent it out. I am trying to build a rental portfolio, but I don't want the HELOC loan eating away at the monthly profit. This is why I would like to flip and try to get money out to pay off the HELOC and have some money for a done payment on a buy and hold without a HELOC and mortgage to pay on it.

Seems to me that you should "try and refinance" that investment HELOC, now! ie. If interest rate is the worst issue now, what makes you think you'd get better HELOC terms/rates (with the same Lender) later? [You want the revolving aspect!]

More to the point, you should always be looking to pay a lot less than actual value, because, the numbers will need to still make sense, even when 100% financed! 

ie. Your all-in cost/debt for those $150-$180k homes should be no more than $105-126k! Good luck...