3 Ways to Make Money with a Home Equity Line of Credit

When investing in real estate most people don’t realize that their home can be a great source for funding deals.  Using a home equity line of credit or HELOC can provide the cash needed to do real estate deals. Here are 3 simple ways to use a home equity line of credit to fund deals:

  1. Flips – If you have enough cash from your HELOC you can buy a property for a fix and flip.  Another option, if you do not have enough money available to do a fix and flip, is to use the cash you have available to get a hard or private money loan.  Hard money and private money lenders are much more willing to lend you money for a flip if you have some cash available to put into the deal.  They usually like you to have 20%-30% of the purchase price of the property plus rehab costs. 
  2. Rentals – If you have enough cash you can buy rental property outright.  With interest rates as low as they currently are, the rent you collect from a rental will cover your HELOC payment and give you a good cash flow as well.  You could also use your HELOC for a down payment on a rental property.  The down payment is usually 20%-30% of the purchase price.  Keep in mind you will still have to qualify for a loan to cover the rest of the purchase price.
  3. Lease option or seller financing – These work for those who have a limited amount of money available from their HELOC.  Lease options and seller financing allow you to get into deals with a smaller amount up front and without having to qualify for a bank loan. 

Another benefit of using cash from a HELOC is that a cash offer is a much stronger offer and will give you a better chance of getting your offer accepted.  You still need to do your due diligence to make sure the deal makes sense.  Keep in mind that there will be a monthly cost to repay the HELOC so factor that in when you are running your numbers on the deal.   Interest rates are at all-time lows, which makes a HELOC some of the cheapest money you can tap into.