BRRRR via HELOC or Cash?

[Ben Cohen]

Hi everyone,

My parents are interested in starting to BRRRR for investment properties, as my dad is a contractor who can oversee the rehab. This will be their first investment property purchase. My question is whether they should use cash or a HELOC on their primary residence to finance.

The options are:

- 90k in cash, i.e. putting down 90k as a 20% downpayment and using a private lender to finance the other 80% + rehab cost

- HELOC on their primary residence. Their home is worth around 450k and they have no mortgage, so assuming an 80% LTV they would be able to get a HELOC for 360k.

What would it look like to use a HELOC to BRRRR? I'm assuming that they would buy 100% cash with the HELOC and then the cash out refinance would eventually pay off the HELOC? It feels like the HELOC would be a better option since they wouldn't have to use their own cash, but let me know if I'm missing something here. Thanks!