Financing for BEGINNER in Iowa

[Miki Smith]

First, please forgive me for beginner mistakes and for any forum faux pas I make. I welcome correction. I know I can learn quickly. We are buying our second property. The first property is a condo we bought in April,2021. We just finished rehabbing the condo. At the moment, we plan to live in the condo for a couple of years. We paid for the condo and rehab with cash from the sale of the home we raised our children in and now we are trying to figure out the best way to finance the next deal. Our lender has suggested a HELOC and told us the amount available was based on an arbitrary number the bank pulled from basic data and does not reflect the real value of our condo. The real value would be significantly higher considering the renovations. The lender said we could pay for own appraisal to get an accurate value and larger HELOC loan.

We are trying hard to comprehend the BRRR method. Do people use HELOC's when BRRR'ing? Based on the BRRR method, if our HELOC is for less than the actual value of the condo, we are leaving money on the table. Is that correct?

We close on our next home at the end of January, so we need to figure this out fast. We will have our own college-age children living with the other tenants in this second home for at least a year. As of now, this property is considered a second home rather than an income property. Thank you for any and all input, we appreciate it so much and would love to be in a position to return the favor when we become more educated.