Just starting out (questions about heloc)

4 Replies

Hello BP people,

I have discovered BP about a year ago and sadly I'm just finally making my first post. I am currently in the process of refinancing my home and my appraisal just came in at $62,000 more than I bought it for just a couple years ago. After the refi is complete, I will have $73,000 of equity. So my question is, can I get a HELOC and use that money for the mortgage down payment on a BRRR? And are there lenders that will allow me to build renovation costs into the loan? And once all is done (if what is mentioned is possible) can I then cash out refi on the property to replenish my HELOC? And if so, is there a waiting period from the time of the initial purchase? If anybody has experience with this, any feedback is greatly appreciated! (BTW I live in Philadelphia if that matters)


Steven Dome

Hey @Steven Dome and congrats on the first post!

Just so Im understanding the question correctly; are you asking if you can get a heloc on the 25% of remaining equity you have on the property after your current refinance is complete? 

If thats what you are asking then I would say that you would need a sufficient amount of capital and decent credit in order to be approved through a bank. As far as the renovation loan is concerned, Hard money may be the best route and I can definitely connect you with a few people I work with. 

Hi, @Steven Dome . In theory, you can use your HELOC money on anything, so yes you could use on a downpayment for a BRRRR.

With that said, finding BRRRR-able properties isn't easy. Part of the process is finding undervalued properties and forcing equity through rehab at such a velocity that you can take out all or most of your initial investment. One of the easiest ways to secure an undervalued property is to pay for it in all cash (either your own cash or via Private/hard money). Many properties that are undervalued are in such disrepair that you can't get a traditional mortgage on them in the first place, plus you typically can get a better deal on an all-cash offer. Just something to be mindful of.

Yes, some lenders will allow you to build renovation costs into the loan. I have one guy that I work with in Michigan who does that. No clue if his bank does properties in PA, but if you DM me, I can share his info.

Assuming that you're able to get all of the above to work, just as with the HELOC, you can do whatever you want with the funds derived from a cash-out refi, so in theory you could pay back your HELOC with those funds. Of course, you want to pay attention to where you have the more favorable interest rate, though, before you do that.

Regarding the "waiting period", that varies from lender to lender. Some require a "seasoning period" where you need to hold the property for 3 to 6 months before you can refinance. Others don't require a seasoning period at all. Really depends on the lender.

If you live and invest in PA, I suggest compiling a list of every credit union in your area, call them all and see about the terms they offer. Everyone has different policies.

@John L Desimone

Hey John, thanks for the response. It lead me to research what I could actually get out of a HELOC and upon further examination, I don't have a whole lot to work with if trying to BRRR a property using that method. With the capital I currently have, it seems like the safest/ easiest route may be to purchase a cash flowing turnkey in a affordable market. But the downside there is, I would likely have to wait another couple of years before I could afford another property, which is considerably slower growth than I would like to see.