Cash vs HELOC for brrrrr strategy

5 Replies

Hello again BP members

I have recently discovered how to pick up not so bad REO SFR's to flip and rent out (or flip and sale .. not my thing though) with basically using the brrrr method

My question is more of which is better scenario to be in

if to pay down my primary residence and then have (easy numbers) 100k available in HELOC money

Or have 100k cash money laying there

And then after having such funds available (easy theoretical numbers)

Go out and Find a REO SFR for 50k

Needs 25k in repairs

Appraises and ARV comes back at 100k

And will rent out for 1400-1200 a month

Cash out finance 75k (75% LTV)

Pay back your self or heloc

And repeat process over

Now my immediate goal is to reach 15k PASSIVE income but i want opinions on how to get there faster 

and with this idea i have seen a few examples of in older threads but not alot

Thanks in advance!

PS: i know cash is king but still paying a mortage vs short term HELOC interest rates and ability of rinse and repeat...

@Jorge Leon Jr , I understand the ease and sense of security that comes with not having a mortgage, but from a purely financial POV, it isn't ideal. Of course, you don't want to be over leveraged. 

Having cash at the ready through a HELOC is great. But as you wait to deploy that capital, the return on equity (ROE) is very low. Your home value will go up the same amount no matter how much equity you have and it could be making you money somewhere else. This is why I suggested holding index funds instead.

personally I like a HELOC strategy. It takes the edge off of trying to use the money/forcing a deal since I am not paying interest on it until I draw it.

But there are a couple of different variables in your situation, you will technically have to pay another set of "closing costs" when you pay off your home, whoever gives you the heloc will have to appraise, underwrite, etc. 

Another factor is the loan available for primary residences are some of the best! So I would much rather get a 30 year fixed for a primary and get the HELOC on the rental property.

Cheers and hope you find what you are looking for!

Originally posted by @Deren Huang :

personally I like a HELOC strategy. It takes the edge off of trying to use the money/forcing a deal since I am not paying interest on it until I draw it.

But there are a couple of different variables in your situation, you will technically have to pay another set of "closing costs" when you pay off your home, whoever gives you the heloc will have to appraise, underwrite, etc. 

Another factor is the loan available for primary residences are some of the best! So I would much rather get a 30 year fixed for a primary and get the HELOC on the rental property.

Cheers and hope you find what you are looking for!

Honestly never thought i could get a HELOC on a rental property this changes things hmmmm

Thank you!! You have made my thinking change slightly now!

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