Should I use a heloc on my property for a flip !
Investor · Miami, FL · Member since 2017 · 84 posts · 37 votes
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
I would personally conduct a side-by-side comparison between a HELOC and hard money, and then proceed accordingly.
When that comparison is done, don't forget that the hard money lender wants interest in most cases from the start on the full amount while a HELOC only requires payments on what you're actually using, so your project plan and timeline is very important.
I would say it depends on the terms and rate the loan. How much money is expected to be made from the flip? 2 years is plenty of time for a flip especially if it is mostly cosmetic. What kind of rate do you have with the HELOC and how sure are you about this particular flip? Have you worked with this contractor before? There are a lot of questions but these are things to consider to see how much risk/reward is involved
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
I would personally conduct a side-by-side comparison between a HELOC and hard money, and then proceed accordingly.
I would personally conduct a side-by-side comparison between a HELOC and hard money, and then proceed accordingly.
When that comparison is done, don't forget that the hard money lender wants interest in most cases from the start on the full amount while a HELOC only requires payments on what you're actually using, so your project plan and timeline is very important.
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
Hi Jerryian,
Yes thats a great strategy to get into flipping. Is this duplex your primary or is it an investment? Reason I ask is because Helocs have different terms depending on the property occupancy. Usually lenders allow you to go up to 70% LTV on investment Helocs but for primary owned properties you can go up to 90% LTV.
First thing is to figure out which category best fits your scenario. Then you have to see if you have enough room to use either or. One way to know your value is by using a virtual appraisal and if it comes in too low then you order a full appraisal to see if you can get a higher value. It will depend on the comps in your area.
Do you have a deal ready to go? you will also need to time it correctly to know when you will need the money by. Theres many different terms for Helocs so its important to choose the best one for your needs. Theres 3 year, 5 year and 10 year draws. These are just a few things to keep in mind when using a Heloc.
Hope this helps a little but more on how Helocs works. Everyone scenario is different. Happy to connect if you wish to discuss further.
@Albert Bui @Matthew Kwan
Hi Jerryian,
2 years to repay for a Heloc is very short--most of the ones I originate come with 20 or 30 year payback terms, with 3-10 year draw periods where you can take out and put back money as many times as you'd like. I would recommend checking around to make sure it's the best you can get. Feel free to reach out with any questions!
John
I would say it depends on the terms and rate the loan. How much money is expected to be made from the flip? 2 years is plenty of time for a flip especially if it is mostly cosmetic. What kind of rate do you have with the HELOC and how sure are you about this particular flip? Have you worked with this contractor before? There are a lot of questions but these are things to consider to see how much risk/reward is involved
So I have experience with the contractor i haven’t found a deal yet I have experience flipping but I never used a heloc .the guy private money and he gives out heloc using his cash haven’t talked to him yet about numbers he is on vacation but I was looking to pull out 50k so I can use that to get into a flip deal but wanted a idea what would that look like paying the 50k and making profit
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
I would personally conduct a side-by-side comparison between a HELOC and hard money, and then proceed accordingly.
Most definitely 🔥 the guy is a private money lender and he does helocs!
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
Hi Jerryian,
Yes thats a great strategy to get into flipping. Is this duplex your primary or is it an investment? Reason I ask is because Helocs have different terms depending on the property occupancy. Usually lenders allow you to go up to 70% LTV on investment Helocs but for primary owned properties you can go up to 90% LTV.
First thing is to figure out which category best fits your scenario. Then you have to see if you have enough room to use either or. One way to know your value is by using a virtual appraisal and if it comes in too low then you order a full appraisal to see if you can get a higher value. It will depend on the comps in your area.
Do you have a deal ready to go? you will also need to time it correctly to know when you will need the money by. Theres many different terms for Helocs so its important to choose the best one for your needs. Theres 3 year, 5 year and 10 year draws. These are just a few things to keep in mind when using a Heloc.
Hope this helps a little but more on how Helocs works. Everyone scenario is different. Happy to connect if you wish to discuss further.
@Albert Bui @Matthew Kwan
Hi Jerryian,
2 years to repay for a Heloc is very short--most of the ones I originate come with 20 or 30 year payback terms, with 3-10 year draw periods where you can take out and put back money as many times as you'd like. I would recommend checking around to make sure it's the best you can get. Feel free to reach out with any questions!
John
I would say it depends on the terms and rate the loan. How much money is expected to be made from the flip? 2 years is plenty of time for a flip especially if it is mostly cosmetic. What kind of rate do you have with the HELOC and how sure are you about this particular flip? Have you worked with this contractor before? There are a lot of questions but these are things to consider to see how much risk/reward is involved
So I have experience with the contractor i haven’t found a deal yet I have experience flipping but I never used a heloc .the guy private money and he gives out heloc using his cash haven’t talked to him yet about numbers he is on vacation but I was looking to pull out 50k so I can use that to get into a flip deal but wanted a idea what would that look like paying the 50k and making profit
Hi Jerryian,
2 years to repay for a Heloc is very short--most of the ones I originate come with 20 or 30 year payback terms, with 3-10 year draw periods where you can take out and put back money as many times as you'd like. I would recommend checking around to make sure it's the best you can get. Feel free to reach out with any questions!
John
Personally, I would only do it through a private lender if they are offering much better terms than a regular lender. Right now Helocs are generally between 9.5-12% interest, 3-10 year draw period, and 20-30 year repayment period. There are options that have no lender origination fees as well, so you only pay title fees and that comes out of the equity at closing. I'd be happy to review the terms he is offering and give you my opinion--feel free to give me a call anytime.
John
Hey bigger pockets happy holidays to you all I really need some advice here ! So it’s been 3 years since I brought my first duplex @415k its now build up equity and is worth over 540k so I have equity in it a refinance doesn’t make sense because I’m locked in at a low rate but I do t want to wait until rates drop to get back in the market I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc ! Would love to hear from you guys !? Thank you in advance
Tapping into the equity of your current property for a flip deal is a strategy many investors use, but it comes with its own set of considerations.
HELOC: The main advantage here is the flexibility it offers – you can draw funds as needed up to a certain limit and pay interest only on the amount you borrow. Given the equity build-up in your duplex (from $415k to over $540k), using a HELOC to fund a flip seems like a feasible option.
Interest Rates and Costs: Even though you're locked into a low mortgage rate on your duplex, HELOC rates are typically higher and can vary. Ensure that you fully understand the terms, including how the rate might change over time. Although your lender is offering a 2-year payback period, assess the interest costs and any other fees associated with the HELOC.
Evaluating the Flip Deal: Before proceeding, it's critical to thoroughly analyze the potential flip. Consider the location, property condition, market trends, and estimated renovation costs. Ensure the projected ARV justifies the investment. It's crucial to have a buffer in your budget for unexpected expenses that often arise in flipping projects.
Risk Assessment examples: the flip doesn’t sell for as much as anticipated or takes longer to sell. Consider the current real estate market trends and how they might affect your flip.
Exit Strategy: Have a clear exit strategy for the flip. If the market cools or the property doesn’t sell as quickly as expected, you need a plan, whether it’s renting the property to cover costs or another form of refinancing.
Alternative Financing Options: Compare the HELOC to other financing options such as a cash-out refinance or a private loan. Each has its pros and cons, depending on your specific financial situation and investment goals.
Consulting with Professionals: Before making any decisions, it would be wise to consult with a financial advisor or a mortgage broker. They can provide personalized advice based on your entire financial picture.
I would personally conduct a side-by-side comparison between a HELOC and hard money, and then proceed accordingly.
When that comparison is done, don't forget that the hard money lender wants interest in most cases from the start on the full amount while a HELOC only requires payments on what you're using, so your project plan and timeline are very important.
Hi Jerryian,
2 years to repay for a Heloc is very short--most of the ones I originate come with 20 or 30 year payback terms, with 3-10 year draw periods where you can take out and put back money as many times as you'd like. I would recommend checking around to make sure it's the best you can get. Feel free to reach out with any questions!
John
I agree with John here. I used a HELOC on my primary to buy and STR and I have 10 years to pay my HELOC back. I used a local credit union that is not even associated with the bank holding my mortgage. I would shop around.
@Jerryian Francois- what are the terms for the HELOC ? rate / fees / payment amount ? Will 30-50K allow you to get your next deal completed ? Have you tried to get a standard HELOC ? Get pre approved for your next deal before you begin looking
I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc !
I’m wondering should I tap into that equity via private money heloc and use about 30-50k to get into a flip deal the lender is giving 2 years to pay back the heloc !
im currently in the Miami Market and although I’m not looking for a 50k profit all in one deal which is possible in this market ! but to be realistic it is possible to remake that in a year in this market . the private lender is willing to do the heloc for about 2 years what do you think ?!
@Jerryian Francois- what are the terms for the HELOC ? rate / fees / payment amount ? Will 30-50K allow you to get your next deal completed ? Have you tried to get a standard HELOC ? Get pre approved for your next deal before you begin looking
So I tried going to a small credit union bank and they were saying our DTI IS HIGH so I kept looking around so my realtor just gave me a contact to a private lender who does heloc haven't had a chance to go over terms yet because he is on vacation he comes back tomorrow !
What do you think ?
Hi Jerryian,
2 years to repay for a Heloc is very short--most of the ones I originate come with 20 or 30 year payback terms, with 3-10 year draw periods where you can take out and put back money as many times as you'd like. I would recommend checking around to make sure it's the best you can get. Feel free to reach out with any questions!
i tried local credit union banks but they are saying me and my wife DTI ARE TO HIGH SO WE DIDNT GET APOROVED FOR A HELOC ! So we found a private money is that option to risky ? John
I agree with John here. I used a HELOC on my primary to buy and STR and I have 10 years to pay my HELOC back. I used a local credit union that is not even associated with the bank holding my mortgage. I would shop around.
@Jerryian Francois- what are the terms for the HELOC ? rate / fees / payment amount ? Will 30-50K allow you to get your next deal completed ? Have you tried to get a standard HELOC ? Get pre approved for your next deal before you begin looking
So I tried going to a small credit union bank and they were saying our DTI IS HIGH so I kept looking around so my realtor just gave me a contact to a private lender who does heloc haven't had a chance to go over terms yet because he is on vacation he comes back tomorrow !
What do you think ?
Jerryain - what was the DTI ? how was the credit union calculating this ? can you ask for lower amount in order to make dti work ? can you payoff some other debt with part of heloc proceeds to make dti work ? what payment amount for the heloc is the credit union using to calculate the DTI ? IF your bank offers HELOCS - try them ....get details on the private HELOC before making decsions as these terms will likely be worse than what you can get from a bankl / credit union
Just curious. Where are you going to buy a house and improve it enough to flip it for a profit with $50K?
I’m currently in the Miami Market and although I’m not looking for a 50k profit all in one deal which is possible in this market !
Just curious. Where are you going to buy a house and improve it enough to flip it for a profit with $50K?
I’m currently in the Miami Market and although I’m not looking for a 50k profit all in one deal which is possible in this market !
Trust me I know ! The plan was to use that 50k not all of it as a downpayment ! To a flip deal with a lender who will cover purchase and rehab cost