Spokane, WA · Member since 2018 · 20 posts · 2 votes
Hi everyone,
I have just recently obtained my brokers license in the state of Washington and I also have a decent amount of equity in my home that I have lived in for over 5 years and I was wondering if there were any webinars/videos/articles or anyone out there that has succeeded in buying property with a HELOC. I have about 100k in equity and I would love to make a move and utilize that equity for my benifit.
Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes
7y
@Hank Austin I used my HELOC as the entire 25% down payment, and the remaining balance as the rehab budget. I'm currently putting in finishes on the property and will hopefully have a renter in there very soon, at which point I will have the unit appraised and refinance to pull my equity out and pay back the HELOC.
Spokane, WA · Member since 2018 · 20 posts · 2 votes
7y
I was wondering about what your process was like. Did you go full conventional 20 percent down? Did you use the whole heloc or did you just use it for the down payment? Did you get renters in there and start chipping away at your heloc immediately?
Rental Property Investor · Neenah, WI · Member since 2019 · 154 posts · 105 votes
7y
@Hank Austin If you are looking to BRRR then it's best to use the HELOC for the purchase and rehab. Then rent it out, let it cash flow for a few months and then re-finance it. If you are looking at a more turnkey type buy and hold then use the HELOC for the down payment and get a conventional loan for the balance. Repeat.
Chelsea, MI · Member since 2019 · 50 posts · 52 votes
7y
@Henry Thomas Austin. With the HELOC your bank is likely to give you a check book tied to the LOC. To draw on the LOC you simply write a check. To buy a house, you can write a check, deposit it into your account and have a cashiers check drawn up to take to closing at a title company. I don't know all the rule for an auction but you generally need cash or it's equivalent.
Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes
7y
@Hank Austin I used my HELOC as the entire 25% down payment, and the remaining balance as the rehab budget. I'm currently putting in finishes on the property and will hopefully have a renter in there very soon, at which point I will have the unit appraised and refinance to pull my equity out and pay back the HELOC.
@Christian Nachtrieb Hi. I currently used my heloc to buy an investment property like you did but still have a balance on my heloc. I’m interested in what you meant by having the unit appraised, refinancing and paying off the heloc. It sounds straightforward but I’m not seeing how it could pay back the heloc. Thanks in advance. Kind of new at this.
Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes
6y
@David Chi I went through the process of a cash out refinance. The bank will send out an appraiser, they'll come back with a new (hopefully higher) price on your property and you pull out equity from it to pay back your HELOC balance.
Real Estate Agent · Clermont Florida · Member since 2019 · 55 posts · 83 votes
6y
@Christian NAC
@Christian Nachtrieb I'm going to utilize this same approach. Double the closing fees but seems like it still turns out less than using a Hard Money Lender. Does that seem accurate to you? I keep hearing that I should use a HML but I have excellent credit with a steady income. Conventional seems to make more sense.
Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes
6y
@Jimmy Epolito I think you’re right. I’ve always gone conventional and it’s my understanding hard money should be used either as a last resort or with very intentional reasons (fast close, no private money connections, etc)
Rental Property Investor · Temecula, CA · Member since 2019 · 131 posts · 54 votes
6y
@Christian Nachtrieb and @Jimmy Epolito. So if I'm tracking, you guys are saying to use a HELOC to fund the down payment with a conventional loan, then rehab and rent and then wait the 6 month seasoning period and then refinance using conventional again?
@Christian Nachtrieb and @Jimmy Epolito. So if I'm tracking, you guys are saying to use a HELOC to fund the down payment with a conventional loan, then rehab and rent and then wait the 6 month seasoning period and then refinance using conventional again?
Yes. That is one option I'm considering. This would allow me to purchase two properties. Or I can use the HELOC to purchase one property with a cash offer, rehab it, wait for seasoning, and then refinance it. Using it as a down payment would also require those properties to be financeable in the first place instill need some rehab to force enough appreciation to get money back out.
@Christian Nachtrieb and @Jimmy Epolito. So if I'm tracking, you guys are saying to use a HELOC to fund the down payment with a conventional loan, then rehab and rent and then wait the 6 month seasoning period and then refinance using conventional again?
Rental Property Investor · Temecula, CA · Member since 2019 · 131 posts · 54 votes
6y
@Jimmy Epolito Thanks. Got it. So if you could find a lender that allows refis without having to wait 6 months, you could scale quicker. Just have to really know your market and comps to make sure you can force enough appreciation to cash out the HELOC money to repeat.
Real Estate Agent · Clermont Florida · Member since 2019 · 55 posts · 83 votes
6y
@Christian Nachtrieb That's awesome! How did it go? I have a lender that will allow 15% down on an investment property and I have another that will loan 80% LTV after the 6 month seasoning. I am looking at homes at $50k or less which allows for a down payment on 2 and $30-35k left to use for rehab on both. Only downside I see is that if a house needs heavy rehab it will not qualify for conventional. Since I am only on my 2nd property I do not want a heavy rehab anyway. I'm in process of trying to find properties which can be improved just enough to utilize that 80% Cash Out Refi.
@Matt Everling You're welcome! Only lenders I have found to refi before 6 months will not use the ARV they will base the loan amount off the price you pay. I have heard of some investors adding the rehab amount to the HUD to overcome this.
Real Estate Agent · Clermont Florida · Member since 2019 · 55 posts · 83 votes
6y
@Matt Everling I wish I could. I have only read about this in the forums. Apparently if you have a rehab estimate there is a way to add it to the HUD (where and How I have no idea) used by your lender to underwrite your mortgage. The funds then get dispersed at closing to cover the rehab or a portion of it. Then you can refi once rehab is complete without waiting for the 6months. I am going to just wait the 6 mos especially if I can get 2 going at the same time. Then do it again the 2nd half of the year. Hope this helps. I have seen multiple posts in the BP forums about that strategy but I am just not experienced enough to try something that creative just yet!
Rental Property Investor · Temecula, CA · Member since 2019 · 131 posts · 54 votes
6y
@Jimmy Epolito Thanks Jimmy! Sounds like a great strategy. I will try to learn more about it too. Any chance you could PM me with the names of your two lenders that do 15% down and the 80% LTV?