How to use a $250K HELOC to buy and hold

[Amul Sutaria]

Hi,

My family member has a 250K HELOC that they are allowing me to use to invest in real estate. Would it be in my interest to use it to buy, say, a $200,000 property in cash, and then immediately refinance? I would want to buy and hold, or BRRRR. Do people do this kind of thing? I'm not so familiar what the steps are to do that, or the detailed mechanics.
I'm looking to cash flow $150-$200.  My realtor says that's pretty doable more west than Northern NJ and also in parts of South Jersey.  

[Michael Lee]

@Amul Sutaria

Sure thing - 

Lenders go by the appraised value of the property, and lend you 70-75% of it's value.

In order to do a successful BRRRR and cash out on all your initial capital, you need to make sure you can renovate and increase the value enough so that it meets this "rule", and you can get most if not all your money back and to pay back the HELOC.

If your property appraises for 100k, most lenders will lend up to 70k-75k.

I put the word rule in quotes because different lenders have different guidelines, but if you are looking for a conventional bank product like a 30-year fixed rate loan, Fannie Mae has their guidelines on how much they can lend up to. (and bank money is the cheapest out there)