HELOC to fund down payment for hard money loan?

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HELOC to fund down payment for hard money loan?

Richard Gonzales
Investor · Fort Wayne, IN · Member since 2017 · 21 posts · 9 votes

I’m very new to investing. I bought a duplex last year as a house hack. It has taken me longer than I’d hoped to get the downstairs unit ready to rent, but it’s finally ready. After purchase, I saved up and payed for the downstairs rehab with cash. The upstairs, where I live, needs a bathroom and kitchen remodel to get the rental income I’m looking for and I don’t have the cash needed to do it.

I really want to scale up and get my next property so I’ve been looking into my options. I had an idea today and would like some opinions.


I'm in a very hot market and with the remodel I did downstairs, I should have quite a bit of new equity. The idea is to get a HELOC on my current residence, use that HELOC to get a hard money loan to purchase a distressed property, BRRRR it and use the equity in the new property to pay off the HELOC and fund the remodel in my current house hack. Then refinance my current property to BRRRR more new properties. My other idea is to use the HELOC to finish the renovations on my current property. I would like to keep my homestead tax credit through this process. Thoughts?

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  • Rene Owczarski
    Rental Property Investor · Des Moines, IA · Member since 2020 · 232 posts · 116 votes
    5y

    @Richard Gonzales I get wanting to move onto the next project and scaling up, I'm guilty of that myself. And it sounds like you're doing the rehab work yourself on the duplex, so to take on a second project at the same time, sounds like your stretching yourself too thin. I've got three projects that I'm trying to work on myself right now, because I know I can do it all, and to be honest I'm failing at all three. So now I'm having to bring in a GC/handyman to get these projects back on track. So if it were me, I'd take the HELOC to finish off the first project and get it all rented out, before moving onto the next house.

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  • Richard Gonzales
    OP
    Investor · Fort Wayne, IN · Member since 2017 · 21 posts · 9 votes
    5y

    @Rene Owczarski Very good points, I appreciate it. I definitely don’t want to get in over my head and wind up strapped for cash, especially with taking on additional loan payments. I have learned very quickly, with my current property, that doing renovations is not something I personally enjoy. I brought in a contractor to finish a lot of work that I was taking months to complete, they got it done in days. 

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