HELOC from 1st ever rental to do 2nd rental

[Chris Momongan]

I just moved home and living with my parents so I have no primary mortgage. I just completed my first BRRRR deal last month and about to complete rehab on it next week.

I bought it for $87k with 25% down pmt (21.7k) and paid 35k in rehab costs, so all in around 60k after closing costs. We're expecting ARV to be 150k.

I was planning on refi but wondering if HELOC is a better option with current interest rates at around 7-8%. I'd still cash flow with refi but I'm not sure how to do the numbers if I did HELOC to pay for down payment on purchase +rehab on next deal. I went to REIA meeting yesterday where I got connected to a lot of hard money, local bank, and private lenders and I couldn't sleep last night thinking of all the possibilities. One local bank said they have no seasoning period on refi so I wonder if that applies to HELOC. Not sure how it works, so can someone tell me their experience using HELOCs from freshly rehabbed deal to scale to next deal? Thanks

[Malcomb Stapel]

@Chris Momongan I have some experience with doing this. Keep in mind that the bank is going to loan at 75-80% ltv. So if your at $150k ARV you will be looking at whatever this difference from $112,500- $120,000 and what you have in it. Depending on what your rents end up being that could drive the ARV up more.

Otherwise, I like the HELOC option because it allows me to have the buying power ready, without paying on anything I'm not using. The only downside would be if the bank suddenly decided they aren't doing these anymore due to economic conditions or some other unforeseen circumstance.