BRRRR with a HELOC advice ...best way to set up repayment plan?

[Jonny Morris]

Pen Fed vs US Bank HELOC

Shopping for HELOC's I feel I have narrowed my focus from many, to a couple of options.

With so many variables, I would love some feedback from people who have a HELOC.

Pen Fed currently offer a HELOC at: 4.5%

There is also an interesting 5 year offer with a rate of 3.75%, 15 year term (2% due of balance each month).

US Bank offer a higher rate approx. 5.80% (as of today), no fees if you are a platinum member (must have at least 25k balance to qualify)

They also offered a 5 year fixed rate of 5.19%.

I would be using this HELOC to BRRRR property. So my question is basically, which is better for me? I don't like the idea of paying back 2% of the loan per month since the goal is to rehab with a higher ARV and obtain a conventional loan, paying back the HELOC in full.

Any BRRRR pro's talk me through the best use of a HELOC? Should I just elect to pay interest and then when higher ARV of property appraised and loan issued, pay back in full?

Thank you for your constructive thoughts BP!

[Christopher Malone]

@Jonny Morris Where I am not yet a pro, I am currently using my HELOC to purchase properties. The first property I purchased I used 25K from my HELOC to purchase the property and received a Hard Money loan to cover the rehab. I knew going into the deal that on month 6 I would be cashing out, so I factored all of my carrying expenses into the deal. I was all into the deal for about 60K and refinanced obtaining a 75K loan at 100K ARV. I then paid off my HELOC and still pocketed about 10K from the deal in addition to the $300 after all expenses (Mortgage, Taxes, Insurance, Reserves, etc.) that the property cash flows. My HELOC is 5% fixed with a 10 year draw period and a 20 year payoff term. Nothing fancy, but it was enough to get me started, which at the time was all I cared about.

Good Luck!