All Forum Posts by: Account Closed

@Axel Meierhoefer Great post, thank you. To summarize your post, the math for a first lien HELOC makes sense as long as you're disciplined and committed to the strategy. One needs to be conscious of the bank's ability to call back the HELOC, but, while important, the holder of the HELOC would (typically) still be able to get a traditional mortgage in this worst case scenario.

I would appreciate your elaboration on bullet point #4 -- what would you recommend as the best way to generate your own "bank list" if someone is interested in pursuing this strategy independently? What are some of the key points of consideration one should observe before taking out a first-lien HELOC?

@Rich Hupper @Albert Bui To Rich's point/question: Could you could create a corporation which had a line of credit that encompassed multiple properties which were held in the corporations name? Similar to an LLC, but the advantages would be a lower tax-rate than a pass through entity, plus the combined assets which could be held as collateral for the bank to extend an even larger line of credit. Perhaps this would be a business line of credit vs. HELOC? Anyone have insight as to that?

But to @Seattle Eltons earlier point (PG 1), the combined LOC (business or HELOC) can be used to purchase deals right on the spot without having to seek out other investors or private capital. I feel like in the long run, you could string a few quad-plexes together with this strategy, use excess income and cash flow the cash flow to pay off debt portion quickly and go out and have access to a potentially very large source of cash which could be used to gobble up the best deals? The more I think about it, the more sense it makes.

And thank you @Naveed Q., that was a great link you shared

Appreciate all of the replies since the original posting. 

One of my chief concerns when contemplating this investment was the rising interest market that we are entering. The strategy may have performed very well in the 2009-2016 markets, while it may not be as advantageous with higher interest rates. I've heard the HELOC follow the prime rate -- does anyone have insight as to how that rate performed over the last 20 years? As I said, the last 10 probably won't give enough history due to the finanical state our markets were in. Must say, I'm pretty unfamiliar with how the structuring of the HELOC's interest rate works.

Overall, it seems fairly split on whether investors think this strategy could be beneficial or not. While I agree with @John Hickey points out, I think the true advantage of the HELOC is the open nature of the structure, where you could openly withdraw and deposit funds as you saw fit. You'd have to have diligence in managing this, but in all honesty, how hard is that really?

Does anyone have any negative experiences once they opened a HELOC in a first lien? I hear a lot of speculation about why it won't work or wouldn't be as beneficial, but does anyone in the community have personal experience with a HELOC deal which didn't pan out?

Thanks again everyone, appreciate the input.

Hi all. Apologies if this topic is addressed in another part of the forum; I've checked through and couldn't find anything which specifically addressed my question. 

I am a young investor with no experience when it comes to the real estate market. I have begun doing a lot of research and really enjoy and value the resources BiggerPockets is putting out. In doing my due diligence and trying to learn as much as possible, I have come across a company called "Replace Your Mortgage". I am curious if anyone else has found this site and could provide their experience or thoughts in general about the company's HELOC strategy.

When it seems to good to be true it usually is, but this strategy does make a lot of sense at least on paper. Yes, when following this strategy the individual must be very diligent in keeping up with the cash flow required, but if they do, I do see how it makes sense even with the variable interest rate associated with the HELOC.

Any thoughts/suggestions?