All Forum Posts by: Stefan Abel

With a 1031 Exchange, You have to put identified properties on a list by a certain time frame, but you do not have to make the decision on the specific property to purchase to roll the 1031 over at the same time. Put all of your choices on the list, as many as you can find, and give yourself some time to narrow down the list later. That is why they give you the time.

@Peter McDonough I am not sure if it is an agency loan. The rate we discussed were 5.5%. I spoke with another investor from the area and he knows someone who has completed 15 deals and uses this bank.

Hey Stefan! What you are describing (HELOC --> BRRRR) is exactly what my partner and I are doing in the Huntsville market. Please feel free to reach out if you have any specific questions on the process, but I can tell you that generally, I have not run into any problems with using a HELOC and then 6 months later refinancing the property on a conventional loan. My HELOC payments on a 50K balance are only $100 a month, and that is what the bank takes into account when they run your debt-to-income ratio. For us it has been a fantastic strategy to jump-start our investing journey, we went from 0 -> 6 units starting with basically no money other than the HELOC. My HELOC is from a local bank out here in Cali but if you need a few recommendations on refinancing lenders hit me up with a direct message.

If you want to take a look at an in-dept description of what we are doing here is the link.

 https://www.biggerpockets.com/forums/223/topics/685820-first-brrr-complete-details-pictures

Thanks for the mention Caleb!

-James

Have you tried a commercial lender? Rates are higher but it's asset based and not on your DTI.

When you go to refi, the bank will pay the HELOC if they don't feel comfortable giving it to you. In really tight situations they may make you close it. They will know the HELOC is for the home purchase because they are going to source the funds.

run your plan by the lender in detail before you buy anything, this way you aren't guessing what will happen. 

delayed finance is 75% LTV or 100% HUD1 whichever is lower

@Stefan Abel

We've been doing exactly what you are looking at. When using the delayed financing exception, our refinancing lender was limited to refinancing based on the purchase price of the home and not the appraised value of the home after repairs. They also repayed our HELOC directly (Not ideal for a Brrrr deal).

If you are doing a Brrrr you are looking for a cash out refinance using the appraised value of the home and not going out of your way to disclose the HELOC was the source of the funds to buy and rehab the property (I don't think they will ask). HELOC will count against DTI just like any of your debt will, so make sure you talk to your lender's underwriting department to make sure you will qualify with added debt service. We were confident we would still qualify so we skipped that step, but make sure you are cautious before sticking yourself with something. After your cash out refi you will have laundered (for lack of a better term) HELOC money sitting in cash in your bank account which frees it up to be 20% down payment. If you are confident you can cover all of your investments with cash, you can repay your HELOC and then draw on it for the next deal if that is preferable for you. We are just paying down the HELOC using our W-2 income and keeping the cash available so we have the option of using it as a down on a larger project if it comes up.

Are you describing the seasoning period as the time HELOC funds sit in a bank account to resemble the rest of your cash assets or the time you own the property before a lender will refi based on your appraised ARV?