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TIL about interest-only HELOCs the hard way at a Denver property closing
I was at a title company in Denver last month and the closing agent mentioned that some investors use interest-only HELOCs to keep payments low while flipping. I had no idea you could structure a line like that to defer principal until after the sale. Has anyone here used one for a quick flip?
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holly_walker763mo ago
Wait seriously? I had no idea you could do that with a HELOC either lol. That sounds like a crazy risky move though because if the flip takes longer than expected you're stuck with interest payments and no progress on the principal. I guess it works if you're super confident in your timeline but I'd be too nervous to try it myself.
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riley_schmidt3mo ago
Adam is right though that HELOC funds aren't treated as owner-occupied debt, so the bank won't call the loan if you're flipping.
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adamgreen3mo ago
My last flip I used a HELOC for the down payment and a hard money lender for the rest, closed in four months flat. The key was having a contractor who actually stuck to the schedule and a pre-listing buyer lined up before we finished the drywall. If you pad your timeline by 30% and keep a cash reserve for three months of interest, it's manageable but definitely not for the faint of heart.
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