Can/Should I use a HELOC for BRRRR?

12 Replies

Hey all, I'm trying to figure out this BRRRR thing. I've got about $80-100k in equity in my personal residence. I'm interested in the BRRRR strategy, but would probably have to do it out of my area for it to make sense. Would it be a good idea (or even possible) to use a HELOC to buy a BRRRR property, then pay off the HELOC once I refi the BRRRR property?

Like I said, I'm not even sure that I can do this.  Has anyone else done this or does anyone have any advice about this?  Thanks!

I've done this and continue to in the future. I basically use cash + line of credit that is on my personal residence to finance the acquisition and rehab of flips. LOCs are great and use just like cash for the most part, my bank even has a debit card for the LOC which makes purchases from vendors or HD easy. I'd start with whoever has your mortgage as they should be able to provide you a better rate and should approve you since they know your payment record with the current mortgage.

Howdy @Phil T.

Yes, you can use a HELOC that way. Many investors do (including me) as a key part of their investment strategy. Just make sure you understand the whole process before engaging in it.

Thanks for the info guys. I'm currently under contract on my first rental property, doing a conventional 20% down mortgage. The BRRRR strategy has always interested me, but I never knew much about it. I'm going to start doing a little more research on it and HELOC's and figure out the best way to do this. Seems like a good strategy as long as you do it correctly, and since I'd be taking money out against my primary residence, I want to make sure I get it right!

@Phil T.

If you are considering using the BRRRR strategy be sure to get the Refinance loan arranged before purchasing the property. Have the exit strategy in place first. It makes the whole process smoother and less nerve racking.

Most good BRRRR deals do not include the ability to use conventional financing for the acquisition. The property is usually to distressed to meet lenders "livability requirement ". I'm not saying it can't be done. Just difficult to do.

Be sure to post any analysis you do here.  We want you to succeed.  Good luck.

Yeah, didn’t think about that. They’re probably mostly cash only deals. I still have quite a bit of research to do. I’ll look into it a bit more and talk to my lender.

If I search the MLS (Zillow, Redfin, etc), is there anything specific to look for to see if it’s a cash only deal (unless it says it in the description, obviously).

@John Leavelle , or anyone else who has done a deal like this, what bank did you use for your refi? The bank I’ve been using isn’t able to do it.

@Phil T.

I use local banks and credit unions for my deals.  You need to shop around.  Call every small bank in your area.  These portfolio lenders have better leeway for their underwriting.  You can also check with Brokers.  They may be able to line you up for the acquisition and refinance loans.

So, are the HELOCs people are using to BRRRR typically interest only during the draw period or are they amortized over 5-10 years? The banks I've spoken to so far require a payment based on the balance and it seems like they are using very short amortization tables. For example: On a $100,000 HELOC balance, the monthly payment would be $1,250/month, which works out to a yearly interest rate of 15%.

Just seems like at a 15% annual rate you’d be better off with hard money.
Originally posted by @Neil Henderson :

So, are the HELOCs people are using to BRRRR typically interest only during the draw period or are they amortized over 5-10 years? The banks I've spoken to so far require a payment based on the balance and it seems like they are using very short amortization tables. For example: On a $100,000 HELOC balance, the monthly payment would be $1,250/month, which works out to a yearly interest rate of 15%.

Doesn't look line interest-only HELOC. Divide your int percentage by 360 times 30 days times your outstanding amt should give you an idea of what your monthly payment will be.

I am in the process of getting a HELOC through my CU that is 6.5% over 20 years.

As I am trying to analyze deals with the Brrrr calculator, using a HELOC, I am not sure how acoount for the HELOC in the calculator. I am using to buy the property outright and paying back interest only until I refinance. It is a variable rate on 105k, currently at 5.65% with an interest only payment of $494.38. Can anyone help me understand how to plug that into the calculator?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here