Cash strapped but want to purchase

[Jonathan Cooke]

My wife and I are debating on taking out a HELOC on an investment property we own to purchase another property. My problem with this is that it's already too hard to cash flow as it is without adding an interest and principal adjustable rate HELOC. Are there other alternatives for down payment capital that are preferred or are there interest only HELOCs for investment property? The property has equity we can tap IF the lender uses income to evaluate the property value. I'm not opposed to 2nd mortgages or switching our current mortgage to another provider if they evaluate the value using the income the property generates. Thank you in advance for all lender suggestions and product suggestions. I'm sure I left out details necessary so don't be afraid to ask.

[Nathan Gesner]

Allow me to play the devil's advocate since nobody else is chiming in.

You want to borrow money to borrow money, thinking a shortcut will make you wealthy. It rarely works out. All those YouTube 24-year-olds with 300 houses in six months? They could be wiped out just as quickly. Ever hear of Dave Ramsey? He was a young millionaire in a hot market . . . until the market changed and he lost everything. I would argue he's smarter than the average person on YouTube or BiggerPockets podcasts, yet he lost everything. You can learn from that or repeat it.

Buying a property with negative cashflow? That's a game for the wealthy and experienced like David Greene. For someone that's "cash strapped" it's a recipe for disaster. The market can still turn south and we could easily see five years with no appreciation.

I know it's not popular around here, but how about building wealth using a tried-and-true formula: save money, invest in a strong location, hold on long term.

Playing with borrowed money or some of these other tricks are for people with experience and the financial freedom to absorb a loss. It's not the smart way to get started.