Financing my BRRR Property

[Hadiya Coppedge]

I'm in the market to expand my real estate portfolio to 3 SFH or a 2-3 bedroom duplex. I want to use the BRRR method to expand. I've researched quite a bit and decided on the HELOC route.

Here is the caveat, I recently purchased a 3 bedroom 2.5 bath townhouse at market price just a few months ago in March 2022. I'm not sure my house has any equity because it's newly built. 

2 Questions:

1. Does anyone have any experience with HELOC on a newly purchased home?

2. Is HELOC the best route? If not, can you offer an alternative that will fit my situation?

[Josef Hardi]

Hi Hadiya, 

I did a cash out on my property back in January 2022, I got 75% LTV out of it. And then I applied for a HELOC with a different lender, I was able to get another 5% out of it. I called a couple of different lenders, and not all of them are willing to go to 80% LTV. Some didn't even want to go pass 50% LTV.

One thing to note is, I do not plan to use my HELOC to use as a downpayment for another property. I used my cash-out amount for that. I would only use HELOC if I have an exit strategy or if I know I can pay it off before it balloons.

A couple of suggestions:

1. Do you have enough capital for a 20% downpayment? If so- maybe consider a DSCR loan.

2. Have you used FHA loan ? If not, you can take advantage of the lower downpayment, as well as low interest rate. Just remember FHA loans have a high mortgage interest. Check if the monthly expenses make sense.

3. Also make sure that you are not stretching yourself too thin. Maintenance costs can creep up, and you want to have some amount saved up for those hiccups.

All the best!