Using a HELOC for the [BRRRR Strategy](/blog/brrrr-method-explained)

The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is one of the most powerful wealth-building strategies in real estate—but it has one major bottleneck: capital recycling speed. Using a HELOC eliminates this bottleneck, allowing you to execute multiple BRRRR deals per year instead of waiting to save cash between projects.

This guide shows you exactly how to integrate HELOC financing into the BRRRR strategy, with real numbers, timelines, and risk management protocols.

BRRRR Basics: Quick Review

The traditional BRRRR method:

1. Buy: Purchase distressed property (usually with cash)
2. Rehab: Renovate to increase value and make rentable
3. Rent: Place tenant, stabilize income
4. Refinance: Pull out invested capital based on new appraised value
5. Repeat: Use recycled capital for next deal

The limitation? Step 5 requires you to wait until you've accumulated enough cash for the next purchase.

The HELOC Advantage: Continuous Deployment

A HELOC transforms BRRRR from sequential to continuous:

Traditional BRRRR timeline:

• Deal 1: Months 1-8 (purchase through refinance)
• Save cash: Months 9-18
• Deal 2: Months 19-26
• Result: 2 properties in 26 months

HELOC-Enhanced BRRRR timeline:

• Deal 1: Months 1-8
• Deal 2: Months 4-12 (overlap during Deal 1 rehab)
• Deal 3: Months 9-16
• Result: 3+ properties in 16 months

The HELOC provides immediate capital for each successive deal without waiting to refinance previous properties.

The Complete HELOC-BRRRR Process

Phase 1: Setup (Before First Deal)

Step 1: Secure your HELOC

• Target amount: 2-3x your typical deal size
• Example: If you plan $80,000 all-in deals, get a $150,000-$200,000 HELOC
• Shop for lowest rate and longest draw period (10+ years ideal)

Step 2: Build your team

• Real estate agent specializing in distressed properties
• [Contractor](/blog/diy-vs-contractor) with rehab experience (get 3-5 references)
• Property manager (interview before first purchase)
• Lender who does cash-out refinances on investment properties

Step 3: Establish your criteria Write down your exact purchase formula (and stick to it):

Example criteria:

• Purchase price: Under $150,000
• Rehab budget: Under $40,000
• After-repair value (ARV): At least $250,000
• Rent: Minimum $2,000/month
• Target neighborhoods: [Specific zip codes]

Phase 2: Acquisition

Finding the right property:

BRRRR properties need:

• Sufficient distress to buy below market value (20-30% discount)
• Fixable problems (not structural nightmares)
• Rental demand in the area (check vacancy rates)
• Refinance potential (ARV must justify loan amount)

The 70% Rule:

Maximum purchase price = (ARV × 0.70) - Rehab costs

Example:

• ARV: $250,000
• Estimated rehab: $40,000
• Maximum purchase: ($250,000 × 0.70) - $40,000 = $135,000

Using HELOC for purchase:

Unlike cash offers, HELOC funds require coordination:

Option 1: Wire directly from HELOC at closing

• Fastest method
• Some title companies comfortable with this
• HELOC lender must wire to title company

Option 2: Draw HELOC to checking, then wire to title

• 30-60 day seasoning may be required by refinance lender
• Safer for lenders who require seasoning
• Plan ahead

Option 3: Get HELOC debit card

• Some HELOCs offer checks or debit cards
• Can write check for [earnest money](/blog/earnest-money-explained)
• Still need wire for closing usually

Pro tip: Ask your refinance lender about seasoning requirements BEFORE purchasing with HELOC. Some lenders don't care, others require 60-90 days of funds sitting in your account.

Phase 3: [Renovation](/blog/bathroom-renovation-cost-guide)

This is where HELOC shines—you have on-demand capital for unexpected costs.

Budget structure:

Create three-tier budget:

1. Base budget: Planned renovation costs (70% of total budget)
2. Contingency: Unexpected issues (20% of total budget)
3. Emergency reserve: Major unforeseen problems (10% of total budget)

Example on $40,000 budget:

• Base: $28,000 (new roof, kitchen, bathroom, flooring, paint)
• Contingency: $8,000 (old plumbing, electrical issues)
• Emergency: $4,000 (foundation crack, HVAC replacement)

Draw strategy:

Don't draw entire rehab budget upfront:

• Initial draw: 50% of base budget
• Midpoint draw: Remaining base + contingency as needed
• Final draw: Any remaining contingency or emergency funds

Why? You pay interest only on what you've drawn. Don't pay interest on money sitting unused.

[Renovation timeline](/blog/home-renovation-timeline-guide):

The faster you complete rehab, the less HELOC interest you pay.

Target timeline: 60-90 days maximum

Week 1-2: Demo and rough-in (electrical, plumbing) Week 3-5: Installation (kitchen, bathrooms, flooring) Week 6-7: Paint, trim, finishing Week 8: Cleanup, inspection, photography

Delays are expensive:

• Each extra month = additional HELOC interest
• Delayed rent collection
• Extended holding costs (insurance, utilities)

Managing contractors with HELOC funds:

Payment structure:

• 10% deposit (to secure schedule)
• 40% at rough-in completion
• 40% at installation completion
• 10% at final inspection

Never pay 100% upfront. HELOC gives you control—use it.

Phase 4: Rent

Tenant placement timeline:

Start marketing BEFORE rehab completes:

• 3 weeks before completion: Professional photos
• 2 weeks before: List on Zillow, Apartments.com, Facebook
• 1 week before: Schedule showings
• Completion day: Applications ready

Goal: Tenant in place within 30 days of rehab completion.

Why this matters for HELOC strategy:

Every month without rent:

• You're paying HELOC interest with no offsetting income
• Refinance is delayed (lenders usually want 3-6 months of rent history)
• Your capital remains tied up

Rent pricing strategy:

Don't overprice hoping for maximum rent:

• Market rent: $2,000/month
• List at: $1,975-$2,000
• Incentive: "$100 off first month with 12-month lease"

Fast placement beats holding out for an extra $50/month.

Phase 5: Refinance

This is where you recover your HELOC deployment and restore your credit line.

Refinance timeline:

Most lenders require:

• 6-12 months of ownership (seasoning period)
• 3-6 months of rent payment history
• Stable tenant in place

Plan for 6-month minimum from purchase to refinance.

Refinance math:

Let's say:

• Purchase price: $130,000 (via HELOC)
• Rehab costs: $35,000 (via HELOC)
• Total HELOC deployed: $165,000
• ARV (appraised value): $250,000
• Refinance at 75% LTV: $187,500

Recovery:

• Refinance loan: $187,500
• Minus HELOC payoff: $165,000
• Minus closing costs: $5,000
• Cash remaining: $17,500

You've recovered your entire HELOC deployment PLUS $17,500 in your pocket.

HELOC restoration:

Once paid off, your HELOC credit line is restored to original limit. You can immediately start the next BRRRR deal.

What if appraisal comes in low?

Worst-case scenario: Property appraises at $230,000 instead of $250,000.

• Refinance at 75% LTV: $172,500
• Your HELOC deployment: $165,000
• Recovery: $172,500 - $165,000 - $5,000 (closing) = $2,500

You still recovered nearly all capital. Not ideal, but not catastrophic.

If appraisal is below your HELOC deployment:

Option 1: Bring cash to closing to fully pay off HELOC Option 2: Partially pay off HELOC, carry remaining balance Option 3: Keep property on HELOC temporarily, refinance in 12 months after more appreciation

Phase 6: Repeat

With HELOC restored and tenant paying rent, you have:

• Full HELOC availability for next deal
• Cash-flowing property producing passive income
• Equity in Property 1 that continues appreciating

Scaling cadence:

Year 1:

• Q1-Q2: Deal 1 (purchase, rehab, rent)
• Q3: Deal 1 refinance
• Q3-Q4: Deal 2 (purchase, rehab, rent)

Year 2:

• Q1: Deal 2 refinance
• Q1-Q2: Deal 3
• Q3: Deal 3 refinance
• Q3-Q4: Deal 4

Result: 4 properties in 24 months

Real-World Example: Complete Deal Walkthrough

Let me walk through an actual HELOC-BRRRR deal with complete numbers.

Month 1: Acquisition

• Property: 3-bed/2-bath single-family, needs full rehab
• Purchase price: $145,000
• HELOC draw for purchase: $145,000
• Closing costs: $3,500 (from cash reserves)
• HELOC balance: $145,000
• Monthly HELOC payment (8% interest-only): $967

Month 2-4: Renovation

• Total rehab budget: $45,000
• Draw schedule:
  • Month 2: $20,000 (demo, rough-in)
  • Month 3: $15,000 (finishes)
  • Month 4: $10,000 (final touches)
• Total HELOC balance: $190,000
• Monthly HELOC payment: $1,267
• Total interest paid during rehab: $3,500

Month 5: Rent

• Listed at $2,200/month
• 15 applications in 2 weeks
• Tenant placed, first rent collected
• Monthly expenses: $450 (property tax, insurance, maintenance reserve)
• Net cash flow: $1,750
• Minus HELOC payment: $1,267
• Net positive cash flow: $483/month

Month 6-8: Stabilization

• Tenant paying on time
• No major issues
• Accumulate 3 months rent history for refinance

Month 9: Refinance

• Appraisal: $265,000
• Refinance at 75% LTV: $198,750
• Refinance loan: $198,750
• Payoff HELOC: $190,000
• Closing costs: $4,500
• Cash recovered: $4,250

Month 10: After refinance

• HELOC fully paid off and restored
• New mortgage: $198,750 at 7.5% (30-year fixed)
• Monthly mortgage payment (P&I): $1,390
• Rental income: $2,200
• Expenses: $450
• Net cash flow: $360/month

Final position:

• Property value: $265,000
• Loan: $198,750
• Equity: $66,250
• Total cash invested: $3,750 (closing costs net of refinance recovery)
• Cash-on-cash return: infinite (monthly cash flow with minimal invested)

Multiple Simultaneous BRRRR Deals

Advanced strategy: Run 2-3 BRRRR deals simultaneously.

HELOC deployment:

If you have $200,000 HELOC:

• Deal A: $80,000 (purchase + rehab)
• Deal B: $80,000 (purchase + rehab)
• Reserve: $40,000 (for contingencies or Deal C)

Timeline stagger:

• Month 1: Start Deal A
• Month 3: Start Deal B (while Deal A in rehab)
• Month 7: Refinance Deal A, restore $80,000 HELOC
• Month 8: Start Deal C with restored funds
• Month 9: Refinance Deal B

Risk management:

Running multiple simultaneous BRRRR deals requires:

• Very strong contractor relationships
• Exceptional project management
• Larger cash reserves (12-18 months)
• Ability to handle multiple mortgage payments if refinances delay

Not recommended for first-time BRRRR investors.

HELOC vs. Cash vs. Hard Money for BRRRR

HELOC:

• Pros: Lowest cost (7-9%), flexible draws, reusable
• Cons: Variable rate, tied to primary residence, limited by equity
• Best for: Investors with substantial [home equity](/blog/equity-vs-appreciation), stable income

Cash:

• Pros: No interest costs, strongest offers, no debt service
• Cons: Capital tied up 6-12 months, slow scaling
• Best for: First deal or very conservative investors

Hard Money:

• Pros: Fast closing, no personal equity required, 90% financing available
• Cons: Expensive (10-14% + points), short term (6-12 months)
• Best for: No home equity, high-value deals, fix-and-flip focus

Hybrid approach: Use HELOC for purchases, hard money for quick-close opportunities when HELOC is deployed.

Common HELOC-BRRRR Mistakes

Mistake 1: Underestimating rehab

Budget $40,000, spend $60,000. Now your all-in cost is too high to recover capital via refinance.

Solution: Always build 20% contingency. If you don't use it, it's extra profit.

Mistake 2: Slow renovations

Every extra month = hundreds in HELOC interest + lost rent.

Solution: Incentivize contractors for early completion. "$500 bonus if done in 60 days."

Mistake 3: Overimproving

Spending $80,000 on rehab in a neighborhood where ARV caps at $220,000.

Solution: Renovate to neighborhood standards, not your personal standards.

Mistake 4: No refinance backup plan

Assuming 75% LTV refinance, then lender only approves 70%.

Solution: Model refinance at 70% LTV. If you get 75%, it's a bonus.

Mistake 5: Depleting entire HELOC

Using 100% of HELOC, leaving zero for emergencies or opportunities.

Solution: Never deploy more than 80% of HELOC. Keep 20% buffer.

Exit Strategies When Things Go Wrong

Scenario 1: Rehab goes over budget

Original plan: $40,000 rehab Reality: $55,000 needed

Options:

• Bring cash from reserves to complete
• Reduce scope (skip bonus items)
• Sell to another investor as-is (minimize loss)

Scenario 2: Can't find tenant

Property sitting vacant 3 months after rehab.

Options:

• Reduce rent 10-15%
• Offer move-in incentive ($500 gift card)
• Accept Section 8 tenant (guaranteed rent)
• Sell as turnkey rental to another investor

Scenario 3: Appraisal too low

Expected $250,000, appraised at $215,000.

Options:

• Challenge appraisal (provide recent comps)
• Bring cash to closing to pay off HELOC
• Keep on HELOC 12 more months, refinance later
• Sell to recover capital

Scenario 4: Can't refinance (DTI too high)

You've done 3 BRRRR deals, now lenders won't approve refinance on #4.

Options:

• Use commercial lender (portfolio loan, DSCR)
• Bring in partner to co-sign
• Wait 12 months for income to increase
• Sell one property to reduce debt load

Tax Implications

HELOC interest deductibility:

Under current tax law, HELOC interest used for investment purchases is generally NOT deductible on your personal return.

However:

If you're a real estate professional (750+ hours annually in real estate, more than any other work), you may deduct HELOC interest as a business expense.

Consult a CPA who specializes in real estate taxation. This is complex and individualized.

Capital gains strategy:

BRRRR properties are long-term holds:

• Hold 12+ months for long-term capital gains treatment (if you sell)
• Better strategy: Hold 5-10+ years, build equity through appreciation and principal paydown
• Consider [1031 exchange](/blog/1031-exchange-guide) if you eventually sell

Your HELOC-BRRRR Checklist

Before first deal:

• ✅ HELOC secured ($100,000+ recommended)
• ✅ 12+ months reserves
• ✅ Contractor team vetted (3+ references checked)
• ✅ Property manager interviewed
• ✅ Purchase criteria documented
• ✅ Refinance lender pre-qualified

During purchase:

• ✅ Deal meets 70% rule
• ✅ Rehab budget includes 20% contingency
• ✅ Seasoning requirements confirmed with lender
• ✅ Exit strategy documented

During rehab:

• ✅ Weekly contractor check-ins
• ✅ Photos documented for refinance appraisal
• ✅ Marketing started 3 weeks before completion

Before refinance:

• ✅ 6+ months ownership
• ✅ 3+ months rent history
• ✅ Tenant paying on time
• ✅ All repairs completed

The Bottom Line

HELOC-enhanced BRRRR is the fastest legal way to build a rental portfolio from scratch. It eliminates the capital recycling bottleneck, allowing you to complete 3-4 deals per year instead of 1-2.

It works when:

• You buy right (70% rule)
• You rehab efficiently (60-90 days)
• You rent quickly (30 days after completion)
• You refinance successfully (75% LTV minimum)

It fails when:

• You overpay for properties
• Renovations drag on for months
• You can't find tenants
• Properties don't appraise

The difference between success and failure is discipline. Follow the formulas, stick to your criteria, and manage risk aggressively.

Your home equity is the most powerful financial tool you'll ever have access to. Use it to build wealth, not to gamble.

Related Articles

• 1031 Exchange for Beginners: Complete Guide to Deferring Capital Gains Taxes
• 1031 Exchange: Defer Taxes, Build Wealth Faster
• [Home [Equity Explained](/blog/home-equity-explained): What It Is and How to Build It](/blog/home-equity-explained)