Offering "all cash" w/ funds from HELOC vs. fixed-rate 2nd mort.

[Sam T.]

I'm a little torn between whether to use the equity I've built up in my portfolio to get a large HELOC, or take out fixed-rate 2nd mortgages on my current properties. The goal is to use the funds to make "cash" offers for new purchases and renovate them.

This would be my first time getting any type of 2nd lien on my properties, so I'm not experienced with using a HELOC to purchase new property. I know if I just got the fixed rate 2nd mortgage, then I would literally have the cash from that loan in my bank account, so that seems like it would be simpler when offering "all cash." I'd prefer to get a HELOC though, so that I won't be paying interest during the times when I might not be actively using the funds. For example if I go a few months between new projects and the funds aren't tied up in something waiting to be finished and refi'd.

Is making an "all cash" offer with the intent to write a check from my HELOC a legitimate way to purchase new property? Or would that be seen as deceitful since it's technically credit and not cash in my bank account? Any other downsides of using a HELOC that I might be missing?

I'm sure lots of folks here have purchased new property with HELOCs before, so it would be really helpful to hear some insight from those who've done it.

[Sheldon Zimmerman]

Hey Sam, Absolutely can use a HELCO. It is in PA considered a cash offer. Just because it comes from a HELCO does not make it less cash than actual cash in your bank. The lien is what is protecting that amount. So personally what I have done is use that HELCO to buy several properties and it makes it so nice to do those BRRRR deals or flips. Then you pay off the HELCO and find another one rather than just sitting on that other loan. Personally highly recommend doing the HELCO if you find a bank that is willing to do that.