HELOC or Hard Money BRRRR

[Tyler Stindtman]

I am new to Bigger Pockets and Real Estate Investing and looking to purchase my first property, preferably using the BRRRR method. I currently have about 50k in equity in my home. I will probably be looking to purchase a home in the 90-125k range. Would I be better off getting an 80% HELOC for 40k at like 5% APR and using it for the rehab and a down payment for a 30 year conventional loan. Or, would I be better off getting a hard money loan for the full cost of the property and rehab for like 10% and then paying it off and refinancing in like 12 months.

Thanks. 

[Michael Glist]

Getting a HELOC and a new conventional loan would defiantly be the cheaper route. I would say it would come down to either you needing to be more aggressive and have the ability to close quicker which means you would want to go the Hard Money route since they will typically close faster. Or checking to see what all the requirements are to get a conventional loan that needs work. If there is too much work needed they may not finance it, or they may have additional guidelines and stipulations that are required that can potentially make the process take longer. A longer process may be a turn off for sellers and may end with you losing the deal.

I hope this helps.