BRRRR USING HELOC EXPERIENCE?

Question

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!

Grant Liddle · Answer

@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.

Greg Dickerson · Answer

@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.

Jordan Deeney · Answer

Hi @Samuel Cardenas. I think @Grant Liddle's technique is spot on. Just make sure you can pay it back soon on a short term project. You don't want to get stuck with a variable rate over a long term.

Austin Powell · Answer

Hey, @Samuel Cardenas how did it go?!

Samuel Cardenas · Answer

Thanks @Jordan Deeney, will definitely take that into account! Do you have experience using this method as well? If so, do you mind sharing your experience?

Samuel Cardenas · Answer

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.

Samuel Cardenas · Answer

Thanks Greg, I will continue to look into this.

BRRRR USING HELOC EXPERIENCE?

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