Flipping Homes using a heloc

19 Replies

Hi,I am a remodeling contractor in the northern virginia area.I have been wanting to flip properties for a few years now and been thinking of using a Heloc on my personal property .I would like to get some feed back on your thoughts on this process ,as well as the pros and cons.I have been a contractor for 30 years and been thinking of shifting over into the home flipping business.I also hold a realtors license as well.Thanks for your time in advance

I am in the process of getting a HELOC now for this purpose. The HELOC is a low cost form of financing that is tax deductible to $100k in my case. I get 10 years to draw funds on what is otherwise a 30 year loan amortization. Payments are interest only. I will only pay interest on funds as they are drawn and can pay them back anytime during the loan term.

A potential downside is the rates are variable.  My rate looks like it will be 3.49%, but that will likely rise.  You might want to consider a home equity loan if you think you will want most of the funds at once and use them indefinitely.  The loan rate is a usually little higher, but locked in.

thanks James . I appreciate the input. I definitely want to check it out 

I use my HELOC as cheap gap funding. It gives me a 10 year runway to build capital in my business. I think its a great way to get a decent amount of capital to start off.

thanks Christofer, ya I think it will be what I need to get started . Thanks 

nothing, already turned in the paperwork, was just trying to get feedback 

@Elias Fahel

Everybody seems to think this is a great idea and I'd like to throw out the downside to this whole thing.

You're a Realtor. You see the values going up and up. You want to participate in the party and see using a HELOC as the right play. Here's the question you're not considering; What happens when the new real estate bubble bursts or when the stock market corrects hard (we can't keep setting record highs day after day, week after week without a correction) and you've encumbered your personal home to do a flip on a property that all of the sudden is worth half what your projected ARV was. What happens when the lender shuts down your HELOC when you're halfway through the project and then you can't finish which means you can't sell.

Encumbering your personal property should be done as a last resort when there is no other financing available to do what you're trying to do and that's almost never the case. We should strive to have our personal home paid off, not leveraged to the hilt.


Hi Stephanie,your right all those things could happen.they are many things that could go wrong. There one thing thats guaranteed in life , that if you live in fear of everything that can go wrong your certainly going to have nothing . If every entrepreneur followed the what if , there would be no success stories in this world.the worst thing in life to live with is regret . Thanks

@Stephanie P. , I have a HELOC and didn't know that a lender could 'shut down your HELOC' if they so desired - is that really a thing? I also disagree that you should pay off your personal home first. I wouldn't have been able to get into flipping if I didn't have that equity to use. We've flipped 7 houses in 2017 and using a HELOC was our launch pad. I don't think you should be overleveraged at any point, but I also don't think you should pay off your mortgage and let that equity go unused either.

Good luck @Elias Fahel !

ThanksCaleb, Best of luck


Can you recommend the lender you used for your HELOC or PM if you can't share publicly.


I lived in my first duplex for 3 years. That allowed me to save up enough money to buy a 2nd duplex which needed major upgrades. I used a HELOC on my first duplex to pay for that project and now I have built equity in both properties. The cash flow has increased as well which has allowed me to pay down the HELOC. HELOCs are definitely a good option to use. Time to repeat!

I would also be interested in lender recommendations. What terms are you seeing ?

Local credit unions are great for helocs. Most credit unions let you open an account with $100 or less. Once an account is open they will allow you to get a heloc.

I agree with Jeff. Local credit union and regional banks are your best bet.

As long as you can afford the payments, then it's certainly cheap money. I use mine here and there.

For the downsides, although reducing or canceling a HELOC is prohibited by Regulation Z, a lender can modify a HELOC when they have a good reason to do so. Some examples of good reasons include:

* Evidence that the borrower obtained the HELOC fraudulently

* A documented poor repayment history

* A decline in the value of the property used to secure the loan

If you were relying on the line of credit as your primary source of funds, and the line gets frozen, you may need access to other funds to finish your rehab project. But if it got frozen because your value went down, then it's likely that the flip's value is down to below what you're in it for making finding additional funds more difficult if not impossible, and thus repayment of the HELOC difficult.

What is the difference between a HELOC and an Equity loan? Or are they the same thing?

Look at a HELOC as a credit card(revolving credit) secured by your home. The home equity loan is just another mortgage on your home. The HELOC usually has a minimum payment of just the interest that is owed for that month. The home equity loan has a payment based on the a full amortization table. Typically the minimum loan payment is both interest and principle payment.
I plan my purchases. So I use my heloc to come up with down payments. I pull the amount of my down payment and put it in a checking account. I let it season for 90 days, then I purchase my next rental. After which I use my heloc to pay down my rental mortgage using what some call velocity banking.

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