Home Equity Line of Credit

[Brian Kreitz]

What are everyone's thoughts on a HELOC? I am not a big fan of leveraging my personal residence(up to about 90%) but the numbers come out better using a HELOC vs hard money. The profit in the flip would only be around $2,000 more using HELOC but my total out of pocket expense would be $8,000 less than hard money. Is it worth leveraging my personal residence(hopefully for 6 months or less), paying less out of pocket, and making 2k more or should I leave my residence out of it make a little less and have more money tied up for 6 months?

[Jeff Cichocki]

I agree with @Will Barnard. HELOC's are great, but they aren't for every situation. You need to way out the pro's & con's to figure out what the best scenario for you is.

When you compare a HELOC to a HML, you have to look at more than the interest rates and fee's. You need to convert that into dollars and cents. If using a HML was going to cost $2,000 more than using your HELOC, but it gave you the piece of mind that if anything goes wrong with the deal, your house is safe, is it worth it to you (the decision doesn't matter what anyone else says you should do - what's right for someone else may not be right for you).

Can the property support the $2,000 as an expense.  Understand, there's a big difference between a cost and making less. If you look at every single fee as a cost, you'll miss out on opportunities because you only looked at one side of the equation. If the property is truly a good deal, it should be able to afford the expense. That expense equates out to you making a little bit less. Is it better to have a cost or make less? A cost is something you come out of pocket for. An expense is something that comes out of your profits. It's subtle, but it's a big difference in how money works and how you think about things.

Good luck!