Can you provide an example of using a HELOC to flip a house?

Creative Real Estate Financing
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Can you provide an example of using a HELOC to flip a house?

Matt Wells
Member since 2019 · 125 posts · 17 votes
Hello, BiggerPockets community. I am interested in using a HELOC to flip a house and repeating the process multiple times. What would really help me is a clear example with numbers of how this would work. Hypothetically, let's say my primary home is worth $350,000 and is paid off in full. I want to get a HELOC and use it to flip houses, one at a time, which would cost $150,000 total for home purchase and rehab. What is the average interest rate on a HELOC? What would my monthly payments be? What are the average fees associated with obtaining the HELOC? Can I pay off the HELOC after I sell the first flip and immediately use it to start another flip? Please provide an example using the numbers I provided and using the average costs and interest rates associated with a HELOC. I am sure there are some costs and processes I am forgetting so please include anything I left out. Also, if you have flipped a house using a HELOC, please provide your experience with your numbers as an example. Thanks to everyone in advance!
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  • Matt Wells
    OP
    Member since 2019 · 125 posts · 17 votes
    5y
    Nobody can help? I think my post was a little long-winded. If someone can help answer I am sure this will help many people besides me! Let's get this conversation going!
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  • Terre B.
    Aurora, CO · Member since 2018 · 180 posts · 166 votes
    5y

    I dont think there is a specific answer to your questions. Can you get a HELOC? Probably, yes, but the variables on that make it difficult to give you the figures you requested. I would suggest you do some research yourself allowing for your credit, regional differences, etc. A good place to start might be bankrate.com. They have calculators for you to determine payments with a variety of scenarios.

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  • Matt Wells
    OP
    Member since 2019 · 125 posts · 17 votes
    5y

    @Terre B. Got it! Thanks! I’ll look into it.

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  • Tom S.
    Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
    5y

    @Matt Wells Using a HELOC would probably be one of your best options for flipping homes, in terms of the lowest rates and fees, versus HML. I can't provide a specific example unfortunately, but if you could have access to $150k cash / credit line for the whole flip (purchase + rehab) it would certainly give you lots of flexibility and negotiating power when purchasing.

    You would probably pay a few points or a flat fee for the loan, and it may be interest only on the draw, but you could have to call around.

    Downside is that you're borrowing from your primary residence, so you're putting that at risk in case things go wrong. Lots of people use that but I know others who will keep their personal residence out of the equation. You would also have to have income and the credit score to qualify for the HELOC.

    Good luck!

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  • Matt Wells
    OP
    Member since 2019 · 125 posts · 17 votes
    5y

    @Tom S. Can you elaborate more on the income requirements? Is a W2 income preferred? Any examples?

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  • Tom S.
    Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
    5y

    @Matt Wells  I can't elaborate on income requirements, as I'm not a lender, and you would have to call around.  In my personal experience, W2 is always preferred over 1099, 700+ credit ideally, no recent foreclosures, BK, tax liens, or a history of settling debt for less than owed.

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  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    5y

    @Matt Wells really not sure how to respond. Borrow money ( HELOC, ) use it to buy a property, fix it , sell it for a profit, and do it again. Not really sure what you are trying to ask. KEEP IT SIMPLE. Again, borrow, fix, sell , do it again. Who cares about the small interest rate. its meaningless.

    PS I suggest going to your local REIA meeting and connect with someone doing deals, learn then apply what you learn

    Good Luck 

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  • Matt Wells
    OP
    Member since 2019 · 125 posts · 17 votes
    5y

    @Bob S. I like this approach! Don't overthink it! Just do it! Maybe I have a case of analysis paralysis. 

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  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    5y

    @Matt Buck you 100$ do, :)  KEEP IT SIMPLE, 

    Good Luck 

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