Home Equity Line of Credit (HELOC)

A HELOC lets an owner borrow against a property's equity the way a credit card works: draw what you need up to a limit, pay it back, and draw again. Some BRRRR investors use a HELOC to fund the purchase and rehab, then repay it from the cash-out refinance and draw it again on the next deal.

Used that way, the line does the same job as a hard money loan but usually without points, and interest is charged only on what is drawn. Most HELOCs carry a variable rate, so the carrying cost moves with the market during the rehab.

A line on a primary home puts that home behind the investment. If the refinance comes in short, the gap stays on the HELOC until it is paid down. Lines on investment property exist but are harder to find and usually come with lower limits. Either way, the plan should work if the appraisal disappoints.

Further reading: Home Equity Line of Credit (HELOC) on Wikipedia.