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Would-be 1st-time lender with HELOC. Is it workable?

Nick Hankoff

I have zero experience, but I hope my question can start a conversation and help others.

Hypothetically, let’s say you’re approved for a $140k HELOC at ~9%. Following the model shown on Mr. Naugle’s YouTube channel in Dec 2022 (How To Earn Money Investing Using Your HELOC), you’d want to lend at ~15%. I believe I’d potentially pocket ~$5k, but this must entail a substantial amount of risk and likely 2nd lien position, right? I haven’t found a similar deal that wraps up in under 18 months.

Hopefully, I will find a suitable opportunity and put my home equity to use, but I appreciate PMC and the conversations here if they show me it’s not the right time or I need to do more homework (so to speak) first.


  1. Shawn Selby

    I think this is more about your appetite for risk than finding someone you can lend to. I could be wrong it may be difficult to find someone who is willing to pay that because I’m guessing you will need to have a payment plus interest paid each month so you can cover the HELOC on your end. I’m not certain about the details of a HELOC and I’ve never had one. I’m not a financial advisor either, just a fellow human.

    First, you have to ask yourself how would doing this affect your sleep. I do real estate and 15% plus payments monthly is pretty steep. Truthfully I’m only comfortable doing real estate and the thought of cryptocurrencies and a lot of other things I come across scare me. Although I can wrap my head around heavy equipment flips because I’ve owned equipment in previous business. I think someone said (on the YouTube channel)  the guy in here who finances semi trucks for around 90 days pays 18%. Maybe have a lot of conversations with different borrowers and see how you feel after hearing about opportunities.

    Anyway, make sure to take into account how it will affect your life if something goes wrong. Rule number 1 don’t lose money. Number 2 I would be concerned if I couldn’t put all the money to work and simply break even all while taking a big risk.  My thoughts are probably the same as yours and others.  If you ever want to talk (580)579-6283 call anytime.

  2. Dwayne Andrews

    Nick – note that all HELOCs are not created equally so be sure the bank you are working with will give you an interest only HELOC.  If you get an interest only HELOC for 140K at 9% your yearly payments would be $12600 or $1050 per month.  If you found a deal to lend to that pays 15% you would earn $21000 per year or $1750 per month.  You would have a positive cash flow of $1750 – $1050 = $700 per month or $8400 per year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        As far as substantial risk goes you could do your homework on the company you are lending to and make sure there is a good track record.  There are deals on PMC all the time that you could get into a first lien position for less than $75,000.  There are also borrower’s (depending on the state) that can take say 75k from me and 75k from you and have us both in first lien positions.  I would suggest looking at multiple deals to distribute your funds into and continue doing research. This is a great community and hope that this info can assist in your journey.

  3. Leah Matsil

    Good conversation here!  I agree with Dwayne, it’s important on both sides, as the borrower on the HELOC, and the lender on a loan, that you’re paying interest only (as most loans you’ll lend on are balloon repayment, meaning the borrower won’t be paying you monthly principal repayments) and that you can negotiate monthly interest income from your borrower (which is not uncommon, and like all the terms, is negotiable). There are definitely deals here < 2 yr term, many people are fix and flip, and others are buy-renovate-rent-refinance (e.g. refi YOU out of your loan with a rental property loan), most of which are shorter term projects.  Some as little as 4-6 months.

    I also really recommend you look through the Connect for borrowers and connect with them, speak to them, understand their business model and personality, see if it’s a fit.  Not everyone posts all of, or any of, their deals but they may have deals or keep you in mind for deals that fit.  Network with borrowers.