Looking to start using a heloc

New York City, NY · Member since 2020 · 1 post · 2 votes

Hey everyone,

I’ve been listening to BiggerPockets for a few years now, but I’ve been hesitant to take the plunge into buying my first investment property.

I currently have a undrawn HELOC on my primary residence that I'm considering using to fund my first investment property. I've been going back and forth between doing a BRRRR and purchasing a turnkey multifamily property. My main goal is cash flow, but I'm struggling with the numbers. Once I factor in the property's mortgage, operating expenses, and paying back the HELOC, the cash flow seems pretty thin. I've mainly been looking at markets in Memphis and Ohio, but I'm open to other markets that might make more sense for my situation.

For those of you who have used a HELOC to fund investment properties, how did you approach it? Would you recommend starting with a turnkey property or going the BRRRR route? How did you structure your HELOC repayment without eating up most of your cash flow?

I’d appreciate any advice, lessons learned, or markets you think are worth looking into. Thanks!

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Stephen Foster

Member since 2026 · 28 posts · 6 votes

Jimmy, thin cash flow is a real warning sign, so it's good you're counting the HELOC. Try modeling it this way. Treat the HELOC as short-term money, not part of the long-term deal. In a BRRRR, the HELOC buys and rehabs the property, then a DSCR cash-out refi based on the new appraised value pays the HELOC back. Long term you carry one payment, not two. That only works if the refi math holds, so underwrite backwards: what will it appraise for, what will it rent for, and will that rent cover the new payment, taxes and insurance with room to spare? If the answer depends on a perfect appraisal, it's not the deal. Turnkey is simpler, but your HELOC money tends to stay in it longer, so the payback drags on cash flow for years. Before you pick a market, ask a lender about seasoning (how soon after purchase they'll refi on the new value) and minimum loan sizes. Both matter a lot in Memphis and Ohio, where prices are low. I'm a mortgage broker, and that one refi conversation up front saves a lot of BRRRR headaches.

– Stephen

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Jason WrayPro Member
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
3d
Jimmy,
The majority of my clients/investors use their HELOC as a down payment tool and for renovations if there is enough. You can stretch a Heloc a long way by focusing on the right REI and the basic metrics. I know the Ohio & Memphis market well and they are both good locations along with Indiana and Sevierville, TN. If you are open to other rental types then I would add Florida and other states for STR/Daily Rentals. Heloc is fairly easy because its the same as a credit card. You only pay on the amount you use and can portion it out or max it out.
Markets like Ohio, Indiana and parts or Memphis can offer lower purchase prices to conserve your Heloc balance and stretch it out to maximize the cash flow and NOI. The success is built into the pre-stage working and running the current and proposed numbers. I work with a team and a Network so that I can cherry pick the best REI, know the rents in advance and if there is any Value ad or how to maximize the rents and ARV. It's actually very easy once you understand the preventive maintenance steps.
I can tell you that I have met a lot of awesome Realtors, GC's, PM's and Wholesalers here on the Bigger Pockets. Once you build a trusted circle each seasoned person in your network becomes a successful tool. If you ever have any questions feel free to reach out or send me an email, I enjoy helping investors learn the loopholes, connecting people and building Networks. Check out my profile and let's connect!
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Divin KanyamaBusiness Member
Accountant · Seattle, WA · Member since 2025 · 681 posts · 285 votes
3d
@Jimmy Bel You're right to pause when the cash flow gets thin after including the HELOC. That's not overthinking—it's recognizing the full cost of the deal. I'd rather pass on a property than make the numbers work by leaving out repayment of the money used to buy it.
For a first investment focused on cash flow, I'd lean toward a well-maintained, already-rented small multifamily over a heavy BRRRR, provided the numbers hold up independently. I'd verify leases, actual collections, expenses, and condition rather than rely on the seller's "turnkey" label. I'd only choose BRRRR with a dependable local team, a detailed rehab budget, contingency cash, and refinance terms discussed with a lender before buying. I'd also test a lower appraisal and a delayed refinance—not assume the refinance will clear the entire HELOC.
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Judith Chime
Virtual Assistant · Member since 2026 · 32 posts · 8 votes
3d
Great question, Jimmy. With BRRRR, a lot of investors use the HELOC only for the purchase and rehab, then refinance into a DSCR loan once it's rented and use the cash-out to pay the HELOC back.
That way you're not carrying two payments long term, which is usually what makes the cash flow look thin. Memphis and Ohio both have deals where that can work
Have you narrowed down a city or a price range yet?
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Marc Del Priore
Lender · Philadelphia, PA · Member since 2024 · 61 posts · 17 votes
3d
Hi Jimmy, using a HELOC for the down payment or rehab can work well, but lenders will focus first on the exit. If you go the BRRRR route, the refinance lender will want a signed lease, a rent that covers taxes, insurance and the new loan payment with room to spare, and reserves left after the HELOC is drawn. It also helps to underwrite the deal with the HELOC payment included, because that payment does not go away if the rehab runs long. I am Marc with Royal Partners, and I am happy to look at a Memphis or Ohio example with you. Feel free to DM me the purchase price, rehab estimate, expected rent and HELOC amount you are considering.
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Stephen Foster
Member since 2026 · 28 posts · 6 votes
3d
Jimmy, thin cash flow is a real warning sign, so it's good you're counting the HELOC. Try modeling it this way. Treat the HELOC as short-term money, not part of the long-term deal. In a BRRRR, the HELOC buys and rehabs the property, then a DSCR cash-out refi based on the new appraised value pays the HELOC back. Long term you carry one payment, not two. That only works if the refi math holds, so underwrite backwards: what will it appraise for, what will it rent for, and will that rent cover the new payment, taxes and insurance with room to spare? If the answer depends on a perfect appraisal, it's not the deal. Turnkey is simpler, but your HELOC money tends to stay in it longer, so the payback drags on cash flow for years. Before you pick a market, ask a lender about seasoning (how soon after purchase they'll refi on the new value) and minimum loan sizes. Both matter a lot in Memphis and Ohio, where prices are low. I'm a mortgage broker, and that one refi conversation up front saves a lot of BRRRR headaches.
– Stephen
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James JonesPro Member
Investor · Collierville, TN 38017 · Member since 2017 · 1k+ posts · 693 votes
3d
Jimmy, since Memphis is on your list, here is the math I run there. I buy single-family under $100K, rehab, and target a $180K to $265K ARV. On a 3BR or better, Section 8 rents run $1,395 to $1,950, so a house has to clear the 1% rule at purchase plus rehab before I look twice. The refinance is a DSCR loan at 70% to 80% of that ARV — that cash-out is what retires the short-term money, whether it is a HELOC or anything else. Run your deal backwards from the appraisal and the rent. If either number misses, the HELOC balance is still sitting there. The deal has to work before the financing does.
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Rickey Shneyder
Lender · Milwaukee, WI · Member since 2026 · 15 posts · 5 votes
3d
Jimmy, the others covered the BRRRR refi exit well, so here are a few HELOC-specific things that tend to catch first-time investors:
1. Know your HELOC's terms. Most have an interest-only draw period (often 10 years) and then switch to a fully amortizing payment, and the rate is usually variable. Underwrite the deal on the payment you'd owe after it converts, not today's interest-only number.
2. Tell the purchase lender up front. The HELOC draw is borrowed down payment money. Many lenders accept it because it's secured by your home, but they'll want it documented, and a conventional lender will count the HELOC payment in your debt-to-income. Better to sort that out before you're under contract than have it surface late in underwriting.
3. An undrawn line isn't guaranteed money. Banks can freeze or reduce lines when values or the economy soften. If your rehab depends on drawing in stages, have a backup plan or draw what the deal needs at closing.
4. Stress test the exit. If the plan is a refi that pays off the HELOC, run it with an appraisal 10 to 15 percent lower and a few months' delay, and see how much HELOC balance is left and whether you could carry it from your own income.
5. Your home is the collateral. Set a hard cap on how much of the line you'll ever put into deals, and keep some of it untouched as a reserve.
If the numbers only work with everything going right, it's fine to keep looking. Waiting for a deal that cash flows with the HELOC payment included is the safer first move.
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Adam Summerer
Lender · Franklin, TN · Member since 2026 · 132 posts · 38 votes
3d
Jimmy, if you go the BRRRR route, ask the refi lender about their seasoning rule before you buy, not after. Some DSCR lenders will use the new appraised value after a few months, others cap you at what you actually put in for the first 6-12 months, and that one detail decides whether your HELOC gets paid back or stays drawn. On Memphis turnkeys I'd also get a real insurance quote and the actual tax bill before trusting the pro forma, those two eat more cash flow there than people expect.
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Ryan BakerBusiness Member
Lender · Strongsville / Cleveland, OH · Member since 2026 · 131 posts · 33 votes
3d
A HELOC is a common way to fund a first purchase, Jimmy. Just keep in mind it's usually variable and secured by your primary home, so the numbers should still work if payments rise. On BRRRR versus turnkey, BRRRR gives you more forced equity but means managing a rehab, while turnkey is simpler with thinner returns. If you end up buying in Ohio or Memphis, it's also worth looking at DSCR loans as a way to refinance out of the HELOC later.
I do lending and have a local construction and property management team in Ohio, so I'm happy to talk through the options on a quick call. My direct line and email are on my profile.
(Drafted with AI assistance.)
[email protected]330-548-3340
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Ryan BrownPro Member
Real Estate Agent · Louisville, KY · Member since 2022 · 100 posts · 32 votes
3d
Jimmy, the HELOC and refinance side has been covered well, so I'll add the market side.
From what we've been seeing here in Louisville, multifamily is really down right now. Buyer activity has slowed, and some properties are sitting longer than sellers expected. If I were in your position, I'd be out making offers on multifamily properties to see if I could score a deal.
That's what I'd focus on when the cash flow looks thin after the HELOC payment. You can't change the interest rate or the HELOC terms, but you can change what you offer. If the numbers only work at a lower price, offer that price with a clear reason and see what the seller says. Plenty will say no, but in a slow market, some will negotiate.
You mentioned you're open to other markets, so I'd add Louisville to your list. We still have small multifamily where the rents can support the price, and there's room to negotiate right now. Happy to walk you through what's out there if you're interested.
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BJ Everson
Realtor · Columbus, Franklin County · Member since 2026 · 107 posts · 31 votes
2d
Jimmy, I'd count the HELOC like any other debt and see whether the deal still works. Use the payment after the draw period ends, since many HELOCs start interest-only, then amortize, and the rate is usually variable. Check that DSCR is still about 1.25x or better and cash-on-cash is 5%+; if it only works with the HELOC left out, I'd pass. A broker rate index at dscrauthority.com shows DSCR loans on 1-4 units at roughly 6.75%-7.625%, so don't assume a low rate. Ask the refi lender about seasoning before you buy, because that decides whether the HELOC actually gets paid off. If you look at Ohio, figure taxes off the purchase price and use leased rent comps, not asking rents. I invest and self-manage in Columbus, so feel free to message me if you want to compare numbers.
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James Loffredo
Lender · Dallas, TX · Member since 2024 · 23 posts · 10 votes
2d
Jimmy, a HELOC is usually short-term money, so I'd be interested to see how long you can have it out for.
On a BRRRR, the DSCR refi pays the line down, which would be really good utilization. Under about six months of ownership the new loan is capped at or below your cost, and cash-out runs about 75%.
On a turnkey there's no rehab bump to refi against. You really don't have any forced appreciation, so the HELOC payment comes out of your cash flow. That's one thing to really think about.
Honestly, if it's one of your first ones and you go the BRRRR route, I'd find something that doesn't need a gut rehab. You're the one putting tenants in it and holding it, so play it fairly safe. If it was me, I'd go light rehab, refinance, and pull a little of the forced appreciation out to pay the HELOC down.
One more thing. If the HELOC is your down payment, draw it and have the cash sitting in your account before you apply. Lenders don't count open credit.
How big is the line, and what are your thoughts on turnkey vs BRRRR?
I run a boutique lender, so weigh that.
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Anthony Smith
Real Estate Agent · Detroit, MI · Member since 2016 · 115 posts · 57 votes
2d
Jimmy — from the operator side of BRRRR, the HELOC only works if the deal is built to retire it. The way I underwrite rehabs in Detroit: purchase plus rehab has to land at or under 70% of a verified ARV (from closed comps, not estimates), so a refinance at 70-75% of value can pay the line off in full and leave you carrying one payment. If the math needs a perfect appraisal to clear the HELOC, pass — appraisals on rehabbed houses in low-price markets come in light all the time. On the rehab itself, I sanity-check scopes at roughly $39/sq ft for a full cosmetic-plus-systems rehab; if a contractor's number comes in way under that, the scope is missing something that will surface mid-project, usually on your HELOC. Turnkey is simpler, but nothing forces your HELOC money back out — it sits in the deal and the interest quietly eats the cash flow you bought the place for. And before you buy anything, have the refinance conversation first: seasoning requirements and minimum loan amounts kill a lot of Memphis and Ohio deals on paper before you ever make an offer.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
2d
HELOCs have variable rates, which are on the rise, so you should only use the HELOC to get a discount buying cash.
Then refi into a mortgage once rented.
First challenge is you think you have to pay asking price!
To determine what to offer on a property:
Determine reasonable market rent, NOT the highest!
·         Deduct NEW property taxes (research change after you buy!)
·         Deduct home insurance costs
·         Deduct maintenance percentage, typically 10%
·         Deduct vacancy+tenant nonperformance percentage
(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)
·         Deduct whatever dollar/percentage of cashflow you want
Now, what you have left over is the amount for debt service.
Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.
Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative Offer Price.
If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.
Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.
As long as the ARV checks out, this is your Offer Price.
It is probably significantly below the asking price. Who cares? If you pay more, you won't meet your metrics and will probably have negative cashflow and/or equity.
So, now you need to try to figure out why the seller is selling and how motivated they are:
- How long has the property been listed?
- How many price drops have there been?
- How beat-up does the property look?
- For MFR, how many vacancies and for how long?
- Etc.
Keep in mind the bigger the gap between your Offer Price and the listed price, the less likely your offer will be accepted.
You may have to make 10, 20 or even 100 offers to get one accepted at the price that meets your numbers.
This is what all investors did BEFORE the Great Real Estate Crash of 2008-2010 spoiled newbies!
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James WachobBusiness Member
Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 895 votes
1d
Hey @Jimmy Bel ! I think your hesitation makes sense. If the numbers are already looking tight after factoring in the mortgage, operating expenses, and HELOC repayment, I'd be careful about moving forward just to get your first deal done. Using a HELOC can be a useful way to access capital, but remember that you're putting your primary residence at risk, and the repayment obligation is still there even if the rental has a vacancy or unexpected repairs.
Between turnkey and BRRRR, I'd look at which strategy gives you the better numbers and fits your experience level. Turnkey can be a simpler way to get started, while BRRRR offers the opportunity to create equity through renovations but comes with more moving parts and execution risk. I'd also make sure you have enough reserves and don't rely on a refinance happening exactly as planned.
Since you're already researching Memphis, I'd definitely keep it on your list. I'm a real estate agent based in Memphis, TN, and I work with out-of-state investors building rental portfolios. I'd be happy to connect, look at some numbers with you, and help you get a better feel for which areas and property types might fit your cash-flow goals.
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Marc MoraPro Member
Investor · Fort Lauderdale, FL · Member since 2026 · 122 posts · 19 votes
1d
@Jimmy Bel , let's connect. Plenty of people find the cash flow gets thin once the HELOC payment is in the numbers, and with your own house behind the loan, it's fair to take that seriously. BRRRR usually takes a lot more of your time than turnkey, so how much of a project you're up for probably matters as much as the market.
Some folks I know would be worth comparing notes with, and I'll share whatever resources might help. Would all the money come from the HELOC?
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Arman AhmedPro Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 971 votes
22h
Quote from @Jimmy Bel:
Hey everyone,
I’ve been listening to BiggerPockets for a few years now, but I’ve been hesitant to take the plunge into buying my first investment property.
I currently have a undrawn HELOC on my primary residence that I'm considering using to fund my first investment property. I've been going back and forth between doing a BRRRR and purchasing a turnkey multifamily property. My main goal is cash flow, but I'm struggling with the numbers. Once I factor in the property's mortgage, operating expenses, and paying back the HELOC, the cash flow seems pretty thin. I've mainly been looking at markets in Memphis and Ohio, but I'm open to other markets that might make more sense for my situation.
For those of you who have used a HELOC to fund investment properties, how did you approach it? Would you recommend starting with a turnkey property or going the BRRRR route? How did you structure your HELOC repayment without eating up most of your cash flow?
I’d appreciate any advice, lessons learned, or markets you think are worth looking into. Thanks!
Hey Jimmy, I'd be careful about stretching the HELOC too thin, especially on your first deal. Cash flow needs to comfortably cover both the property expenses and the HELOC payments. I'd lean toward a solid turnkey multifamily to get started, but don't overlook the Midwest, where there are still opportunities to find undervalued properties with stronger cash flow potential. You can invest out of state without doing everything yourself if you have the right boots-on-the-ground team to help manage the process.
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Anthony Smith
Real Estate Agent · Detroit, MI · Member since 2016 · 115 posts · 57 votes
2h
Jimmy, the thin cash flow you're seeing is the honest answer — trust it. A HELOC works for a BRRRR when it's treated as bridge money with a dated exit: buy, rehab, rent, refinance, and the refi retires the line. It fails when it becomes permanent financing, because then you're carrying two payments on one house and the deal was never built for that.
So underwrite backwards. Start with the refinance: what will the house appraise for, what rent will an appraiser credit, and does that rent cover the new payment, taxes and insurance with room left? If the refi at a realistic — not perfect — appraisal doesn't clear the HELOC, the deal doesn't work, no matter how good the purchase looks.
On turnkey vs. BRRRR for a first deal: turnkey is simpler, but your HELOC money sleeps in the deal for years, and turnkey pricing usually means the equity was already taken by the seller. If you go BRRRR from New York, the make-or-break isn't the market — it's having someone local whose only job is verifying the rehab is real before draws go out. That's where remote BRRRRs quietly bleed.
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Ty Burns
Lender · Salt Lake City, UT · Member since 2013 · 151 posts · 22 votes
1h
You're reading the cash flow right. If it looks thin after the HELOC payment, that's the deal talking, not you overthinking it.
Treat the HELOC as bridge money with a dated exit, not permanent financing. On a BRRRR that means buy, light rehab, lease, then a DSCR cash-out that actually retires the line so you're left with one payment. Underwrite that refi backwards first: realistic appraisal, rent an appraiser will credit, and whether that rent covers the new payment, taxes, and insurance with room left. If it only clears the HELOC on a perfect appraisal, pass. Turnkey is simpler, but the HELOC money usually sleeps in the deal for years and quietly eats the cash flow you bought it for.
Before you pick Memphis or Ohio, ask a DSCR lender about seasoning and minimum loan size. Both kill a lot of low-price deals on paper. Happy to look at a sample deal with you if you want to message me the purchase, rehab, rent, and how much of the line you'd draw.
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