Home Equity Line of Credit and Cash on Cash Return

[Daniel Highsmith]

I recently got a HELOC since I'm looking to by a good deal fast when I find it. After reading some BP articles and posts about analyzing deals, I usually make the good/bad deal decision based on the Cash on Cash Return. I've been looking at deals based on a 30 year mortgage loan with 20% down. I get my Cash on Cash Return percentage based on the down payment plus any repairs I have to find. But, with a HELOC I'm not putting any money down. What's the best way to analyze a HELOC loan deal?

[Brent Coombs]

@Daniel Highsmith, not cap rate (which is for used for commercial bldgs), but cash flow.

I did say that your net income increase didn't have to be high, but, $840 per year?

Nope, sorry, seems a TERRIBLE use of your HELOC! I reckon you've underestimated the fees too!

UNLESS, its ARV would be in the $100k+ range! Then, it'd generate its own borrowing power, or would be a good flip opportunity. Cheers...