Home equity loans versus bank/lender for getting started

[Caroline Landreth]

New here and getting my feet wet in the learning stages of real estate investing. I'd like to get some recommendations from those more seasoned. We have around $200k in home equity and are about to begin the hunt for single family flips/rentals and/or multi unit rentals. Has anyone used equity loan to get started? Should we reserve the equity for EMD and rehab costs while applying for loans through bank/lenders to cover purchase price? Any advice on which kind of equity loan may be best in our case? Thanks!

[Robert Khalev]

@Caroline Landreth

Here is my recommendation:

I used a HELOC from my primary residence.

I get a loan from another lender and use a portion of the heloc to pay for the downpayment and loan origination fees.

For example:

Let’s say I have 70k purchase price and 30k rehab.

I got a 90k loan for 10k down with 8k in loan origination/processing fees.

I used a portion of my heloc to fund the 18k and also used a portion of my heloc to fund the monthly interest payments for the 90k loan until the home began cash flowing.

I hope this example is useful. The power of “safe” leverage is underestimated!