Use Investment Property Equity or Cash for Down Payment

Starting Out
1yFollow

Use Investment Property Equity or Cash for Down Payment

Jason Mayers
Member since 2025 · 2 posts · 0 votes

I have an investment property w/ 320k of equity tied up into it. The loan is at 3.25% so I don't really want to touch it if I down have to. I currently rent and want to buy a primary home soon. I also have $200k of cash available that I need to put to work. I'm looking at homes between 575-700k to purchase in a tax free state and want to put 10% down. Should I use my cash available or take out a HELOAN and just pay it off quickly? 

Investment property: $1100 payment / $1500 rent (will increase $100 each year to $1900) , $122,000 owed, $458,000 appraisial.

Income: Net $20k/mo after maxing out 401k/IRA/HSA.

Savings: $200k in a HYSA (would put into index funds if I didn't use for DP)

Credit: 820

TImeframe: 22 years to retirement

No credit card or other loan debt.

0Reply
25 views

2 Replies

Jump to latestLatest
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y

    If you are going to use the loan for a downpayment on a primary residence, you should consider the amount of interest you will pay on the loan balance as well. HELOCs are high in rate unless you have a personal banking relationship. 

    It would be a different story if your goal is to buy an investment property as the loan would be paid down through the rental income earned on the property. In this case you are just getting yourself into higher debt at a high interest rate. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Jason Mayers
    OP
    Member since 2025 · 2 posts · 0 votes
    1y

    I see what you are saying and I did some number crunching.

    A $75k Home Equity Loan would be approx $510/mo for 30 years.  I would of course pay it back much sooner than that.  By adding $510 to my Investment Property Mortgage that would be approx $1600/mo and I'm renting it out for $1500.  I would almost be breaking even, minus repairs, which haven't been much over the years.  

    Am I thinking of this in the right way?  Or would it still be better to pay it with cash, invest the rest and use equity to potentially buy a 4-plex down the line?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free