Thoughts on using HELOC from primary home for first investment property

Member since 2025 · 2 posts · 6 votes

Hi All - My wife and I have been considering taking a HELOC out on our home to start investing I've ran some numbers (using ChatGPT) seeing if it would make sense with the understanding that the monthly payments from the HELOC would need to be built into the monthly rent - thus feeling like it's a challenge. Our approach is to use 20-23% for the down payment and looking at townhomes $280k and under, being that the price points are doable, 2/3 bd 1.5/2 bath is what we're looking into.

We would love to hear from any and all that have used this strategy or in general!

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Caleb Brown

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

If you are going to use a HELOC I would do it on a BRRR or something you can refi out of. Using it as a DP to put down on a 30 year loan is tough. The chance it cashflows is slim. When you use it on a BRRR you can pay it back then rinse and repeat

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Kerry BairdPro Member
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
1y
You are right that the payment needs to be accounted for via the rents you receive from the investment house. Additionally, there is risk of the interest rates increasing over the time you have the HELOC open. Reduce the risk of those increased payments by fixing the rate on funds you borrow (such as with a second mortgage) or by saving, using a tax return, doing a side gig, selling something you don't need, etc.
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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
If you are going to use a HELOC I would do it on a BRRR or something you can refi out of. Using it as a DP to put down on a 30 year loan is tough. The chance it cashflows is slim. When you use it on a BRRR you can pay it back then rinse and repeat
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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y
A Heloc is a revolving line of credit, typically with a variable rate. It's basically a giant credit card that has a lower rate because it's secured by your home as collateral, rather than being unsecured like most credit cards. This type of financing facility is meant for short term uses of liquidity. Using it for long term financing, like a downpayment on an investment property, is not really a good idea.
Using it to quickly acquire a new property is fine if you have a reliable means of repaying the Heloc funds within a year or two. If these funds will be tied up in the property for the foreseeable future, then a Heloc is not appropriate. An expectation of a cashout refi on the new property in the next couple years is unlikely to pan out unless you force significant equity into it once you buy it. Same goes for a 2nd lien - most loans are going to cap at 75-80% LTV on investment properties, and it's unlikely that a property will appreciate 20%+ in the next 2-3 years.
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Aubrey Cavey
Member since 2024 · 2 posts · 1 vote
1y
Hey! A few investors I've worked with use HELOCs to fund their projects. Most of them will use it to ether do a fix & flip or use it to a BRRR. If you want to chat more I'd love to hop on a call, I am also a Charlotte local.
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Aristotle Kumpis
Specialist · Long Beach, CA · Member since 2011 · 879 posts · 398 votes
1y
Most people think that even if the HELOC payment doesn't cover the debt and expenses on the new investment property, that it's a bad deal. I don't think so. You are leveraging and using money that you have sitting in your home, which is doing nothing for you. And you are buying an income producing asset that will appreciate. Sure, it might take a few years to cash flow positive. But if you purchase in a good area, appreciation will far outweigh the cash flow dilemma.
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Kemonté Bateman
OP
Member since 2025 · 2 posts · 6 votes
1y
Thanks all for sharing your thoughts and experiences. What I love about the dialogue, is everyone perspectives which pushes creativity when being strategic.

After trying to make the numbers work for a townhome, at the end it just doesn't (for now). However, after recently looking into duplexes - it could make more sense to go that direction than a townhome. Still using a HELOC but putting 5% down to minimize the risk and interest payment - and yes, we also thought about using the tax return to assist to paying back the HELOC.

For us, we're not necessarily looking to "break the bank" but to just get in the game and if that means we're to break even in the beginning, we'll take that.
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Helen Adeosun
Member since 2025 · 38 posts · 20 votes
1y
Hi Kemonté rather than a HELOC have you thought of other means of getting into the game? I love chatgpt but I would try a prompt such as "what are creative means to finance a downpayment given the high interest environment and are not a HELOC".

AI models are brilliant, but point and shoot and context based so you need to ask it to open up to things you may not have though of you can ask it by prompting “pretend you are a real estate investor with very little cash saved search forums such as bigger pockets and reddit”. That way you get the benefit of years worth of ideas that are more recent.

That being said my first deal was funded by savings and my Roth IRA which gave me up to 35K I needed for fixes and the down payment. That's a loan from yourself and the interest goes back and that different than "drawing". The tax code also allows for a tax benefit if the loan from your Roth goes towards real estate. I just paid it off — my retirement account has gone up and you can do it several times. If you and your partner do this that may be what you need to get started.
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William ThompsonBusiness Member
Accountant · Williamstown, NJ · Member since 2025 · 330 posts · 178 votes
1y
Quote from @Kemonté Bateman:

Hi All - My wife and I have been considering taking a HELOC out on our home to start investing I've ran some numbers (using ChatGPT) seeing if it would make sense with the understanding that the monthly payments from the HELOC would need to be built into the monthly rent - thus feeling like it's a challenge. Our approach is to use 20-23% for the down payment and looking at townhomes $280k and under, being that the price points are doable, 2/3 bd 1.5/2 bath is what we're looking into.

We would love to hear from any and all that have used this strategy or in general!

Using a HELOC can be a smart way to get started—it gives you leverage without selling your primary home. The key is making sure the rent covers not just the mortgage and expenses, but also the HELOC payments, especially since those are variable. A lot of investors run into trouble when they only pencil in the basics and forget about taxes, insurance, or vacancies. If the numbers work after including all of that, then it can absolutely be a solid entry point. I’ve seen people use it successfully, but the ones who win long-term are conservative in their projections.
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