HELOC for BRRRR?
We are in the midst of securing a HELOC that we intend to use to pursue a BRRRR deal(s). We would like to use the HELOC becuase all-cash offers are king in our market and we also realize that few if any banks and sellers are willing to work through the FHA 203K loan process (which would be necessary to fund the improvements on the sorts of BRRRRs which we are pursuing).
Our dilemma is whether or not to max out the HELOC (ie: to take either the 80% option or the 90% option). My opinion is that we should get as much as possible so that we can pursue a wider range of possibilities, and so that we don't come up short on any potential deals that we may want to pursue.
The difference in the in interest rate between the 80% option and 90% option is a quarter of a percent, which does not appear to be a pro-forma breaker, especially since we are using the HELOC as a bridge loan until we can complete the rehab and seasoning before refinancing into a conventional 30 year loan.
Other than the difference in percentage on the HELOC, can anyone think of reasons why a disciplined investor would not want to have a larger line of credit at their disposal? Might it inhibit our ability to get financing on a property (if we were to wish to secure a mortgage for the property purchase and only use the HELOC for rehab)? Anything else we haven't considered?
