BRRRR USING HELOC EXPERIENCE?

7 Replies

Good afternoon Bigger Pockets family!

So, currently own 100% of equity in a property and have been looking on how to expand my portfolio in the real estate business. After doing research I found the BRRRR strategy using HELOC. Does anyone have experience using this method? If so, what did you learn, struggles, things to lookout for? Is there a better way to go about it? Etc.

Thank you guys so much in advance!

@Samuel Cardenas HELOC can be a great strategy to Buy and Renovate but then you're stuck until you refi out with a permanent mortgage.

The advantage is you have the credit line ready to strike for a cash deal. 

Disadvantage your cash is stuck in the deal.

@Samuel Cardenas I used a HELOC to do a cash purchase on a duplex that I am now renovating and plan to rent out. After renovations are complete, I plan to refi the property to pull my cash out to pay off the HELOC and the renovation costs.

The HELOC I am using has a variable rate that could change quarterly. So, I don't mind using it for a short term project, but would be reluctant to tie it up for longer than a year due to the interest rate uncertainty (Although the Fed Reserve Chairman recently mentioned that they are not planning on raising interest rates anymore this year). So far, I have only experienced one interest rate bump that I factored into my estimation when planning the deal.

The HELOC was very easy for me to use as it was setup as an account with my credit union and I could withdraw funds whenever I wanted for any amount up to the limit. I found it to be useful in negotiating the deal and the time to close is greatly decreased when you do not include financing in the deal.

Thank you for your time @Grant Liddle, its extremely helpful to see other people doing really similar things! This is almost exactly what we are attempting to do with the HELOC.