We often hear from members that they are unsure of using hard money and equity lines as a way to finance flips. I was a banker for over 25 years before leaving to do what I am doing now. Back in my banking days, I did many HELOCs for real estate investors. I’ve also worked with many investors that use hard money.
Hard Money is easy to get, but as soon as you purchase a home and draw down the money, that high rate of interest starts adding up quickly. If it takes you longer than expected to rehab and sell the property, you can easily lose money simply because of the interest that accrues.
Equity lines, on the other hand, are much cheaper at this time than Hard Money, but you are locking up the equity in another property…likely your personal residence, to use for real estate investment. If you fail to pay that back, you can lose your home.
Personally, I am not a fan of hard money as it eats away at the profit, but if that is your only option, then it’s better than not doing the deal at all. I know many investors that use HELOCs as a flexible and cheap alternative, but you do risk your other property. In the end, it’s really up to you which way you go. I would certainly recommend chatting with your financial adv