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Updated over 2 years ago, 07/10/2022
Using HELOC to start RE Investing
Hi!
Has anyone begun their RE investment journey with a HELOC? How did this look for you when you first started? how far into RE investing are you now?
thanks!
We took out a 60K HELOC from our home. We used 40K for DP and rehab for our 1st LTR. The other 20K was left for reserves. Three years later we were able to pay back that loan and then use it again (25K the second time) to purchase the next LTR. We then BRRR method this home and were able to pay off the loan and the 1st home. Now we are under contract for our third LTR
Quote from @Kay M.:
Hi!
Has anyone begun their RE investment journey with a HELOC? How did this look for you when you first started? how far into RE investing are you now?
thanks!
thats what im looking to do on our primary home. not planning on spending all my HELOC as the DP. trying to find the right property to start with.
Get your HELOC now so you are ready when you find the right home. We also took a 30K helco on the first investment property when I needed to put a new roof on that home. So we now have 90K in HELCO's cash if we need it
I took a HELOC out a year ago to build an ADU. The ADU is finishing up this month, and I'm in escrow on my first short term rental with the remaining balance of my HELOC. The HELOC has been great and has allowed me to cut my living expense by tapping into my home's equity.
@Kay M.
This is a popular strategy. It's not how I started but I have used a HELOC for a down payment and I would do it again.. A couple things to keep in mind.
1. Most HELOCs are variable interest. You can negotiate a maximum rate increase.
2. Have a plan to pay it back, so you aren't making interest only payments for eternity.
3. Learn how this will effect your credit (if it matters to you). It is classified similar to a credit card, not a mortgage.
As long as you have a good plan it's a great source for funds. Hope this helps!
Quote from @Kay M.:
Hi!
Has anyone begun their RE investment journey with a HELOC? How did this look for you when you first started? how far into RE investing are you now?
thanks!
I used a HELOC against my primary residence to buy / rehab 4 single family homes and build a 5th all in an expensive market. I was able to buy ~3mm in real estate using a line that was sub 200k, 1 to 2 a year over a 4 year span. The line got paid down with funds from cash out refis on the rentals and I'm just waiting on the next deal to do it all over again.
@Kay M.
Yes, 14 years ago we started with a 60k heloc. We will be at a 128 doors next week. Best decision we ever made.
Quote from @Kay M.:
Hi!
Has anyone begun their RE investment journey with a HELOC? How did this look for you when you first started? how far into RE investing are you now?
thanks!
Kay,
I am in the same situation and just made a post similar to this. I hope everything works out well for the both of us! Ill make sure to keep my posts updated and hopefully you do the same. Maybe we can learn from each other and the wealth of knowledge in these forums.
Carlos definitely!
thanks all for such valuable insight!
@Jake Rodriguez for sure! My main dilemma as well is learning about ways in which the HELOC can be paid back
@Carlos Medina
Same here, bought my first SFH rental with a $43K primary residence HELOC, paid it back over a couple years. Great move to tap unused equity and make it work for you. Just don't stretch yourself too much and get over leveraged!
Troy
I'm about to take a HELOC out on my first home to purchase another property. Still deciding between a BRRR and an STR
That's not how I started on my RE investment journey, but I would say that having a HELOC in your back pocket is always a good idea, even if you don't think you need it right away. If you don't use it, there's no down side that I'm aware of, but if the right thing investment comes along, you have cash at your fingertips.
This is something I'm looking into as well - however for me it would be a partnership between my mother and I. I wonder if anyone has advice on the best way to structure that. We would be using her home for the HELOC and I would be doing everything else.
Structure a separate LLC or partnership that acts as the holding company and has docs that state how profits/expenses split? This seems to keep her home protected (of course we have to make sure proper debt service). If anyone has thoughts please let me know as I am also interested in this topic