HELOC to do a BRRRR

[Bradley Adams]

My wife and I own a duplex that we rent out that has about $660,000 in equity. I am thinking of doing a HELOC on it. This is my first time and this is the part where I get a little shaky. Assuming a LTV 70% for a HELOC we could get $462,000 to draw from? If I used this money to do a brrrr I should by something at 70% of ARV? So say I used $400,000 to buy a home and rehab, I would want the ARV to be $520,000? I rehab, rent, and then refinance? Now is where I get even more shaky. I see on other threads that you can get your money back to buy another rental after refinancing (the repeat portion of brrrr). I apologize if this seems dense but how do you get your money back after the refinance? In addition, has anyone done this outside of their own area? It is tough to find anything in my area of the SF Bay Area at that low of a price.

[Corby Goade]

Hey @Bradley Adams, there are no dumb questions! However, if you can, it's best to buy the property for cash up front- it saves you from having to pay the bank closing costs twice. It gives you a great deal of negotiating power too- many buyers will accept a lower cash offer over a higher financed offer. If you pay cash, you can also refi right away. If you can't pay for the entire thing in cash, then yeah, you have to pay those costs twice and wait six months to season the loan before you can refi. 

Keep in mind, if you use a HELOC on your personal home, banks consider that a cash payment.