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How To Use A HELOC To Buy Real Estate

In this video, Brandon Turner shares how to use a HELOC (home equity line of credit) to fund your next real estate investment! A home equity line of credit, popularly known as a HELOC, is what people can use if they have already purchased a home and have some equity tied up in it. For example, if someone purchases a home for $100,000 with an $80,000 loan and has paid down the loan to $60,000—all while the house has appreciated to $120,000, then the owner can take out a HELOC to tap into the $60,000 of equity they have on the property ($120,000 value minus the $60,000 loan outstanding). They can then use this for a down payment. Pros It’s a cheap financing option in terms of interest rates and closing costs. You can pay it off whenever you like. You pay on the outstanding balance, not the entire HELOC. Cons: You are losing the equity in your original home and increasing the cost to retain it. Most HELOCs have adjustable rates. This does not allow you to easily predict your financing costs. Strategy A HELOC is a great way to jump start your real estate investing if you’ve already purchased a house and have significant equity in it. This is a great financing option for almost any strategy. You can use it as a down payment for buy and holds, for rehab costs on a fix and flip, or a combination of the two.