Thoughts on using HELOC/HOME-EQUITY LOAN for purchase of new Primary Residence?

Charlotte, North Carolina
General Real Estate Investing
1yFollow

Thoughts on using HELOC/HOME-EQUITY LOAN for purchase of new Primary Residence?

Mayur Chaudhari
Member since 2024 · 7 posts · 1 vote

Hi All, 

I am renter in Charlotte and have a ton of equity in our first home in Hawaii (now a rental). Looking to do a BRRRR on a new primary residence in Charlotte but wanted to seek advice on whether I should use HELOC/HOME-EQUITY LOAN against our Hawaii house to pay for down payment and renovation costs. Not sure about drawbacks of doing this... anyone have any advice or experience in the matter?

Trying to get our real-estate portfolio growing and tired of renting!

0Reply
52 views

Most Popular Reply

Caitlin Davis
Lender · 645 Madison Ave. New York, NY · Member since 2023 · 28 posts · 12 votes
1y

Hi Mayur. Plenty of investors start this way, and it's a great idea IF the numbers work. This is not something you would want to "hope for the best" with. You’re pledging your primary residence as collateral, which increases your overall risk. 

When underwriting potential deals, it's crucial to include all interest costs from the HELOC in your expense calculations. Run projections for different rate scenarios to ensure you'll still have positive cash flow even with rising rates. That way, your final purchase price and ROI estimates accurately reflect the true cost of using a HELOC.

1Reply
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Caitlin Davis
    Lender · 645 Madison Ave. New York, NY · Member since 2023 · 28 posts · 12 votes
    1y

    Hi Mayur. Plenty of investors start this way, and it's a great idea IF the numbers work. This is not something you would want to "hope for the best" with. You’re pledging your primary residence as collateral, which increases your overall risk. 

    When underwriting potential deals, it's crucial to include all interest costs from the HELOC in your expense calculations. Run projections for different rate scenarios to ensure you'll still have positive cash flow even with rising rates. That way, your final purchase price and ROI estimates accurately reflect the true cost of using a HELOC.

    1Reply
  • Loren Clive
    Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
    1y

    I have done this. Even when I have the cash, sometimes for fund sourcing it's easier to tap the HELOC then pay it off afterwards because the funds are spread over separate accounts.

    I have also used HELOC to purchase cars due to lower interest rate at the time. May not be true these days!

    I have my HELOC through Bank of Hawaii. There are some credit unions offering amazing rates right now too.

    0Reply
  • Ryan RomingerBusiness Member
    Real Estate Broker · Indianapolis, IN · Member since 2018 · 340 posts · 144 votes
    1y

    Tapping into your Hawaii home's equity via a HELOC or home equity loan could be a solid way to fund your BRRRR in Charlotte, especially since it avoids higher-interest hard money loans. A HELOC offers flexibility with interest-only payments initially, while a home equity loan locks in a fixed rate.

    Drawbacks? You're leveraging an existing asset, meaning added risk if values dip or rents slow. Also, lenders may have stricter terms for out-of-state investment properties. Make sure the numbers still work with your BRRRR strategy, factoring in higher rates and potential delays in refinancing.

    The first step you might want to reconsider is speaking to lenders to see the terms they might offer.

    [email protected]317-935-0075
    Intrigue Real Estate & Property Management4.6272 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free