Best way to structure HELOC loan

[Shawn Skaggs]

I am setting up a HELOC on my personal residence to use for RE Investing. I currently have one multi family property that I bought to buy and hold and want to continue that strategy. The line will be for $100k and set up as a second lien against the property.

Yesterday I got a call from my banker saying they were setting it up as a 12 month revolver with interest only payments. I thought about it a lot last night and this morning and that seems like a great line to flip houses or even do the BRRRR Strategy but at the moment, that's not what I'm doing. I'm focused on buying rent ready property (I want to stay primarily small multi-family) and holding it for cash flow. I know there's a lot of money to be made in flipping and that the BRRRR strategy can be great but I really don't have the time to manage the flips / rehabs right now.

Knowing I want to buy and hold turnkey or rent ready, what's the best way to structure the HELOC?

[David H.]

@Shawn Skaggs

KeyBank has a very strong HELOC for the primary residence.

I got one late last year for Prime -0.25%, which is effectively 4% today.

The structure is 15 years interest only and then it terms out for 15 years

Throughout the life of the loan you have the option to term out a portion of your balance and lock it into a fixed rate. Good to do if you use it for a large down payment and you see the rates rising. Probably won’t be seeing that for a couple years but it’s nice to have the option.