Using HELOC for BRRRR Strategy – Legal & Financing Implications?

Question

Hey BP community,

I'm considering paying off the mortgage on a property jointly owned by my mother and me. It’s her primary residence, and she’s retired—so paying it off would ease her monthly expenses. I have enough stock I can liquidate to cover the remaining mortgage balance.

My goal is twofold:

1. Help her financially.

2. Unlock access to a larger HELOC that I can use to fund future BRRRR deals.

Here’s the plan I’m considering:

Pay off the mortgage in full.

Use the HELOC (secured against this property) to fund the full purchase price of another investment property.

Pay for the rehab with my own cash.

Refinance after rehab to force appreciation and repay the HELOC + some rehab costs.

I spoke with a loan officer who mentioned that since my mother is the primary resident, she must be the primary borrower on the HELOC. That makes sense, but here’s where it gets more complex:

If I pay off the mortgage, I’d essentially be covering 95% of the property’s value. This could trigger gift tax issues unless I update the ownership percentage accordingly.

If I do adjust ownership to reflect my financial contribution, are there any implications for the HELOC (since my mother needs to remain the primary borrower as the resident)?

Would love to hear from anyone who’s navigated a similar scenario or has insight on:

Using HELOCs as 100% financing for BRRRR.

Legal/tax implications of adjusting ownership on a jointly-owned primary residence.

Structuring this to avoid unintended tax consequences while keeping financing options open.

Appreciate your input!

Ashish Acharya · Answer

@Arthur Tolentino Using a HELOC to fund BRRRR deals is doable, but since your mother is the primary resident, the lender will likely require her to be the main borrower, which limits your control if you're not on title. Paying off 95% of the mortgage could trigger a gift tax issue unless ownership is adjusted to reflect your contribution. Once you add yourself to the title, then it is jointly owned property and can create a partnership if this is used as a business asset later on. Your mom will lose itemized deductions as you own a portion of it. You can however, deduct the interest from the HELOC as a business expense if you add yourself.   To avoid unintended tax consequences, consider documenting your payoff as a loan, not a gift, or explore setting up a family LLC or trust to formalize ownership and financing.This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Arthur Tolentino · Answer

Hi Ashish,

Thanks for the detailed breakdown. Just to clarify—I’m already on both the loan and the title of the property. Given that, it sounds like I should be in a solid position to utilize the HELOC for BRRRR investments and still claim the associated interest as a business expense.

Appreciate the insights.

Best,

Arthur

Mike Grudzien · Answer

Talk to a CPA well versed in real estate.