2025 and Looking to Invest in Real Estate

Investor · CT · Member since 2024 · 5 posts · 2 votes

A partner and I, both of who work a full time job, are looking to get into real estate investing. Focusing on a long term rental for our first property, we are just beginning our search. I have listened to plenty of podcasts and ready a number of books, but only a few mention purchasing yours first rental with a HELOC. Would anyone be able to offer general advice to this approach? We do have cash available, but with a large amount of equity in our primary residence, we wanted to avoid tapping into that cash to instead take advantage of our equity. Any insight from those who have done this or those that suggest we don't take this approach would be appreciated.

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Julia Lyrberg

Lender · TX · Member since 2024 · 308 posts · 197 votes

Hi Michael, Using a HELOC to fund your first rental can be a smart move, especially if you want to keep your cash on hand for other expenses or future deals. It lets you tap into your home's equity, usually at a lower interest rate than other loans. Just be mindful of the variable rates and have a plan to cover payments if rental income slows down. It's a solid strategy if you stay prepared for unexpected costs and keep some reserves on hand. Plenty of investors have used this approach to grow their portfolios.

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Julia Lyrberg
Lender · TX · Member since 2024 · 308 posts · 197 votes
1y
Hi Michael, Using a HELOC to fund your first rental can be a smart move, especially if you want to keep your cash on hand for other expenses or future deals. It lets you tap into your home's equity, usually at a lower interest rate than other loans. Just be mindful of the variable rates and have a plan to cover payments if rental income slows down. It's a solid strategy if you stay prepared for unexpected costs and keep some reserves on hand. Plenty of investors have used this approach to grow their portfolios.
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Samuel Eddinger
Meriden, CT · Member since 2018 · 704 posts · 501 votes
1y
Hey @Michael Klick. I'm an investor from CT.
I have used HELOCs for probably most of the purchases of the properties I own. I found it to be a great vehicle while I was working a W2 job as an engineer. I even bought 3 properties in one day using the HELOC to fund the down payment on each of those purchases. I will say that during that time, the HELOC interest rates were very low. Today, you are likely to get a rate at 8 to 10 percent. I'm still using it for flips and other investments but not trying to be long HELOC loans as 10% is still expensive money.
If you want to talk more, I'd be happy to have a conversation. DM me if interested.

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Preston DeanBusiness Member
Realtor · Fort Worth, TX · Member since 2021 · 779 posts · 368 votes
1y
Hi @Michael Klick
There are several advantages to uses a HELOC. It gives you the flexibility kind of like a credit card that allows you to borrow a certain limit and withdraw funds as needed. You also only pay interest on the amount you use. Also HELOC's typically have lower interest rates than personal loans since it is secured by your home. In some cases interest paid on the HELOC can be tax deductible if the funds are used for home improvements.
Best of luck from Fort Worth!
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Michael Klick
OP
Investor · CT · Member since 2024 · 5 posts · 2 votes
1y
I just wanted to say thank you all for the responses and insight!
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
1y
HELOCs are fine, but keep in mind that you really only want to use 50 percent of less (each) of your available equity just so you aren't creating a problem that you can't solve later if the value of your personal residences fluctuates.
If you both have W2 jobs though, have you looked into getting qualified together and just getting a loan, 10 percent down each? That would be a separate mortgage and not what amounts to a second loan on your personal residence, which if you have spouses, they might not be that into.
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David Constant
Real Estate Agent · Connecticut & Rhode Island · Member since 2020 · 43 posts · 23 votes
1y
Hey @Michael Klick and welcome to the community! It sounds like you've done a lot of the preparation work required to hit the ground running. I second what has been said about using a HELOC to help fund your purchase and rehab. Part of the reason we have that equity in our homes is to tap into it and turn it into even more wealth. I have a number of clients who have leveraged their equity to purchase a 2nd - or 10th - investment property. If you'd like to connect more, DM me or respond here! I live right in Glastonbury and I serve the greater Hartford area.
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Julia Lyrberg
Lender · TX · Member since 2024 · 308 posts · 197 votes
1y
Hi Michael! Using a HELOC to fund your first rental can be a great strategy, especially if you want to preserve your cash for other expenses or unexpected costs. It gives you access to funds at a relatively low interest rate, and you can repay it as the rental generates income. Just make sure the rental property's cash flow comfortably covers the HELOC payments and other expenses. Also, factor in potential interest rate changes if the HELOC isn't fixed. It's a solid way to leverage equity, but as with any financing, make sure the numbers work and you're comfortable with the risk. Good luck!
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Michael Klick
OP
Investor · CT · Member since 2024 · 5 posts · 2 votes
1y
Quote from @Jonathan Greene:

HELOCs are fine, but keep in mind that you really only want to use 50 percent of less (each) of your available equity just so you aren't creating a problem that you can't solve later if the value of your personal residences fluctuates.
If you both have W2 jobs though, have you looked into getting qualified together and just getting a loan, 10 percent down each? That would be a separate mortgage and not what amounts to a second loan on your personal residence, which if you have spouses, they might not be that into.

I know it has been a while since you posted this and while my partner and I have both established HELOCs, I have been thinking again about what you said here. With the HELOCs now set, we are curious as the best way to approach getting pre-approved for our first property while we search for the right fit. The plan was to utilize the HELOC as the down payment then getting a conventional loan to cover the remaining 80%. If I may, in your experience, is this difficult to accomplish with a HELOC already established? We are learning as we go here and I am curious on the approach others have used when going for their first property after getting their HELOC set up alongside an LLC and so forth. Any thoughts or insight would be appreciated.
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
1y
Quote from @Michael Klick:

Quote from @Jonathan Greene:

HELOCs are fine, but keep in mind that you really only want to use 50 percent of less (each) of your available equity just so you aren't creating a problem that you can't solve later if the value of your personal residences fluctuates.
If you both have W2 jobs though, have you looked into getting qualified together and just getting a loan, 10 percent down each? That would be a separate mortgage and not what amounts to a second loan on your personal residence, which if you have spouses, they might not be that into.

I know it has been a while since you posted this and while my partner and I have both established HELOCs, I have been thinking again about what you said here. With the HELOCs now set, we are curious as the best way to approach getting pre-approved for our first property while we search for the right fit. The plan was to utilize the HELOC as the down payment then getting a conventional loan to cover the remaining 80%. If I may, in your experience, is this difficult to accomplish with a HELOC already established? We are learning as we go here and I am curious on the approach others have used when going for their first property after getting their HELOC set up alongside an LLC and so forth. Any thoughts or insight would be appreciated.

That will be tough to use your HELOCs together to get another loan because of your collective DTI so it will depend on that.
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David Constant
Real Estate Agent · Connecticut & Rhode Island · Member since 2020 · 43 posts · 23 votes
1y
The best thing you can do is to get in touch with a few lenders and walk through your specific scenario. Any good lender will be able to guide you to what will work for your specific situation. Feel free to DM me and we can set up time to chat 1-on-1 more about this.
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Shawn AckermanPro Member
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
1y
@Michael Klick Congrats on getting things moving in your investing journey. Remember this is a marathon......That said are you planning to flip, hold(short or long term?) The general rule of thumb when using debt is to ensure that whatever asset you buy with the debt should make more than the debt service.
I'd say start the process of securing your HELOC if you havn't done so and spend time analyzing deals and determining what type of investor you are looking to be. Once I know that I could better assess whether the use of debt to get started would be the best choice.
All the best!
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Melissa JusticeBusiness Member
Rental Property Investor · Phoenix, AZ · Member since 2024 · 519 posts · 1k+ votes
1y
Hey @Michael Klick
Using a HELOC to finance your first rental can be a great way to leverage equity in your primary residence without tapping into cash savings. The pros include lower interest rates, flexibility, and preserving cash for other opportunities. However, the risks include putting your home at stake, potential for variable interest rates, and short-term borrowing requirements. It's important to ensure you're comfortable with these risks and consult a financial advisor.

If you choose to use a HELOC, consider traditional financing or private loans as alternatives if you prefer not to risk your home.

As for your first rental, markets in the Midwest and Southeast offer great opportunities with turnkey properties that are tenant-ready and appreciating. Cash flow depends on the down payment, but using a HELOC could keep your cash reserves intact while you get started.

Make sure to build a reliable team (property managers, agents, etc.) to help you manage the property while working full-time. That is what our team at Rent to Retirement has been helping investors to do for a decade now with BP. I'm happy to answer any questions you have about analyzing markets or getting started. Most importantly, choose a market that aligns with your goals!
Wishing you much success,
Melissa, Investment Strategist at Rent to Retirement

[email protected]313-221-8718
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