I am considering using the BRRRR method and financing the cycle by pulling from equity in my own home. I would love to know if anyone has done this, what is the best way to pull out the money (I.e. refinance, cash out finance, home equity loan, home equity line of credit). I am wanting enough to buy a house at auction and to cover any renovation costs. I have a VERY low interest rate on my home, and I am close to paying it off. Any advice would be appreciated.
Rental Property Investor · Everett, WA · Member since 2015 · 458 posts · 386 votes
7y
@Erin Newton a HELOC will be your lowest cost source of capital. With regards to how you will access the money, the easiest way is to move the money into your checking account. You will start paying interest on the money borrowed starting the day you move it. If you don't win the auction, you can return the money and only pay the accumulated interest.
As for how do you pay the auction, that depends on if you are buying a property on the court house steps or via an online auction. If you are purchasing the property in person you will need to bring a cashiers check or checks, equaling the maximum amount you want to bid. If you are using an auction site, they will take a deposit via a credit card and then you will wire the rest of the fund per the instructions provided by the escrow company.
Whatever you choose to do, be sure you done through due diligence on whatever property you decide to bid on. While in many cases you will not be able to inspect the property, you can pay for a title report.
I would be interested to see what others would say, but. A home equity line of credit will be the cheapest way to get access to your money. It also provides you liquidly long term. Once you have purchase the BRRR property (if you buy it at a discount) you maybe able to refinance and pull out all of the money and pay your line back down to 0. Then you would still have access to that money again.
ok, in all my research, the one thing I cant figure out is how to use the HELOC as cash. Say I go to an auction, and win a property, how do I use the HELOC to pay?? I live in Washington State, so the property would be above $100k. Is that possible with a HELOC?
Rental Property Investor · Everett, WA · Member since 2015 · 458 posts · 386 votes
7y
@Erin Newton a HELOC will be your lowest cost source of capital. With regards to how you will access the money, the easiest way is to move the money into your checking account. You will start paying interest on the money borrowed starting the day you move it. If you don't win the auction, you can return the money and only pay the accumulated interest.
As for how do you pay the auction, that depends on if you are buying a property on the court house steps or via an online auction. If you are purchasing the property in person you will need to bring a cashiers check or checks, equaling the maximum amount you want to bid. If you are using an auction site, they will take a deposit via a credit card and then you will wire the rest of the fund per the instructions provided by the escrow company.
Whatever you choose to do, be sure you done through due diligence on whatever property you decide to bid on. While in many cases you will not be able to inspect the property, you can pay for a title report.