Updated over 8 years ago on . Most recent reply
HELOC Advice for 1st Flip
Hello BP! I've been thinking through ways to help beef up my cash reserves to purchase my 1st flip, and have been seriously considering opening a HELOC. Since you obviously don't pay anything (other than smallish paperwork fees to open) until you actually draw on the line, it seems to me to be a no-brainer to have open and available for when the time is right. Is there anything else I could be missing or not thinking about, that would be a negative to just having the line available? Any risk I'm unaware of if I use the same bank that holds my mortgage? Any experienced flipper or investor feedback is welcome. Thanks in advance!
Most Popular Reply
I recently did the same thing. Had a HELOC opened on main residence and bought my first house in December. I am now in the process of putting a tenant in place and putting a mortgage on it as early as possible to be ready for the next one.
I really like this strategy due to cutting out the high interest rates of a HML and private financing.
Make sure to shop around for setup fees. All banks are different. I found a local bank that didn't charge any fees with setting up the HELOC aside from an annual $50 account maintenance fee.
I would also recommend choosing the interest only option, especially if you plan on making cash purchases and refinancing out of them.