HELOC vs Hard Money Lending to fund 1st BRRRR project.

[Eddie L.]

Going to be funding my first BRRRR next ($70k-120k purchase + rehab). I have the option of using hard money or HELOC from my primary residence. I'm debating on which option is better. I plan to refinance within 6 months to lower rate / longer term.

All else being equal, which do you prefer? Has anyone used both and found one option more favorable?

HML higher rate (7-9%) but fixed. HELOC usually lower rate but variable and also your house is used as collateral. May have hidden costs with appraisals, title, etc.

[Mike Davis]

@Eddie L. that's great you're getting started. Using Hard Money for your first BRRRR, if you don't have experience, you will be looking in the 9%+ range. With the hard money loan, you may be able to finance 100% of the REHAB on the property.

Possibly consider trying the hard money loan, with the HELOC for the down payment only. You will probably be looking at 25% down if you have zero experience with the BRRRR model.

As you get more of these under your belt, your terms, rates and points will definitely improve.