Our personal residence is paid for and it's worth approximately $378,000 (according to a quick desktop appraisal from our local bank). We would like to take out a HELOC. At 80% LTV, that would give us $302,400 available funds to draw on and use to make cash offers. The bank will give us up to $250,000 with no fees, but if we want any more than that (and we do:) we have to pay $2331 in title insurance. Is it worth it?
We've never used hard money and are kind of newbies...we've purchased 2 properties/7 doors so far.
Thank you in advance!
I personally wouldn't. That seems like a 4% fee right off the top for the extra $50k. I've so far avoided financing fees (I also have a $250k HELOC) and believe they eat into the return of properties in the $200-$250k range too much to be worth it. But, I think it depends on what area you're in and if you have your eye on a specific deal. If you want to avoid fees, consider going the refi route and take an 80% loan on your home. Lender credits right now at 3.5%+ may cover all of your closing costs.
It would also help to know what you plan on using it for to answer - is it fix/flip, buy and hold, BRRR, or something else?
We are hoping to BRRRR. We are currently executing a refi on our first BRRRR, and we'd like the next one to be a little bigger (purchase price on the first one was $299,000). So if we can find the right properties, purchase prices will be somewhere between $300K and $500K most likely.
I think it's worth it. It's possible, or even likely, that you might target a property over the next 10 years (not sure what the draw period of your HELOC is), and not be able to afford it unless you get the extra funds. In the grand scheme of things, $2k isn't that much if it means missing out on a good deal. I also paid around that cost to get a larger HELOC limit. I could have gotten even more with an appraisal but I decided not to, and regret that decision.
Thanks for your feedback. I met Liz Faircloth (from the DeRosa group and InvestHER) at a meetup where she was speaking recently, and personally asked her this question, and she encouraged me to go for it. I'm glad I did because today, not only did everything go through as planned, but the lender said they were able to waive title insurance fees and all other fees! Maybe because of other funds we have that could be used as collateral? Not sure! Anyway, phew...I feel like we just saved $2331!