Kickoff a BRRRR with heloc?

[Steven Skarupa]

Although I'm new to real estate investing, I've bought and renovated a couple primary residences. Now I want to get to the promised land and cut my day job.

3 years ago I bought a vacation home near Cape May, nj for 155k(cash), put in 60k in rehab and just got a cma for 268k. Yah!!! 53k in profit! But, we're emotional attached to this property so not interested in Airbnb or renting it.... But I'm thinking hard about how to leverage the capital in the house and kick off a BRRRR.

What do you think about getting a heloc on this house and then treating the funds almost like a private lender to myself. Once I'm through to refi step in my BRRRR, I'd return the money to the heloc until the next deal and then repeat.

Seems like I could do this for n houses and I'd only have to pay interest on the heloc as holding costs until I got a tenant and refi on each rental. Hopefully earning equity on the rehabs along the way, so I would be using a smaller and smaller portion of the heloc over time(or being able to go for larger duplex/multi fam properties)...

Does this make sense? What am I not thinkng of? What am I risking if I do this? And how would you mitigate it? Are there other alternatives besides heloc and cash out refi?

Thanks in advance!

[Tucker Cummings]

I just did this on a property that I own, bought outright for 77k on Monday last week, valuation came back on Tuesday for 124k, 80% HELOC gives me a 99.2k buying power. There are no closing costs and if I draw down at least $2400/year, the maintenance fee is waived. Even if I don't, the maintenance fee is only $99/year. When the HELOC is not in use, I cash flow $900-$950/month. When I do use it, interest rate is 4.5% and it is a variable rate, but I can lock it into a 20 year fixed rate mortgage whenever I want.

Like you said, I am able to act as my own private money lender and I wouldn't have to solicit money when I find a deal. Not to mention I have very strong cash flow and it helps balance the debt in my portfolio. I can use my monopoly money aka fake money aka HELOC to create real, cash flowing assets.

Happy to share even more about it if you would like. As a final note, I would highly recommend putting a HELOC on the house. This is one of the best financial decisions I've ever made.