Flipper/Rehabber · Minneapolis, MN · Member since 2019 · 11 posts · 2 votes
Me and my partners are getting into real estate and we were told a heloc was best way to get cash for first property. As anyone used this technique, and if so was it a good choice?
The rule of thumb for first deals is only bet money you can afford to lose.
So whether your use your heloc will be based on your risk tolerance in regards to your primary residence, and your ability to pay the additional interest long term should things go south.
There's also a possibility of the line getting frozen if you get in trouble and start missing payments.
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.
Other than that, it's great source of cheap money.