HELOC > BRRRR

[Amy Raye Rogers]

The following is a few reasons why we've used lines of credit to scale our portfolio as opposed to using the BRRRR method. The BRRRR method is a great tool, but has certain drawbacks that are accentuated in the current market place. Let's weigh the pros & cons.

1) The line of credit allows you to capture the equity in your portfolio without having to conduct a risky refinance.  Pitfalls of the refinance include an unpredictable appraisal process, reduced cash flow, reduced equity, and a risk for significantly higher interest rate.  Do you really want to max leverage that 80k 1920's build with impending capital expenses?

2) The line of credit allows you to make "cash offers" that are more competitive then the down payment, conventional loan offers that are less appealing to sellers.  You are more nimble and more attractive using this method.  You can also save considerably on closing costs.  The cash payment off the line can be spun off into a commercial or conventional line later at time most advantageous to you.

3) Your equity saved provides you more exit options for your existing portfolio. You're reduced leverage allows you to make a profit when you sell a property from your portfolio and you are less exposed in a falling market. BRRRR makes much more sense in a rising market with low interest rates than it would right now. A line of credit can be opened or closed at any time without impacting your existing assets.

4) You control your leverage by selecting which properties you want to cross-collateralize.  This is the KEY POINT = control.  As an investor you want to minimize your exposure to risk and maximize your ability to move quickly and competitively when a good deal emerges.

This strategy has allowed us to grow from 1 door to 20 in 2 years.  We also have a massing net worth due to the protected equity using lines of credit.  I highly encourage more investors consider this course of action!