HELOC Advice for 1st Flip

[Brad Young]

Hello BP! I've been thinking through ways to help beef up my cash reserves to purchase my 1st flip, and have been seriously considering opening a HELOC. Since you obviously don't pay anything (other than smallish paperwork fees to open) until you actually draw on the line, it seems to me to be a no-brainer to have open and available for when the time is right. Is there anything else I could be missing or not thinking about, that would be a negative to just having the line available? Any risk I'm unaware of if I use the same bank that holds my mortgage? Any experienced flipper or investor feedback is welcome. Thanks in advance!

[Lee Haskins]

I recently did the same thing. Had a HELOC opened on main residence and bought my first house in December. I am now in the process of putting a tenant in place and putting a mortgage on it as early as possible to be ready for the next one.

I really like this strategy due to cutting out the high interest rates of a HML and private financing.

Make sure to shop around for setup fees. All banks are different. I found a local bank that didn't charge any fees with setting up the HELOC aside from an annual $50 account maintenance fee.

I would also recommend choosing the interest only option, especially if you plan on making cash purchases and refinancing out of them.