Buy with cash & get a HELOC or only put 20% down?

2 Replies

A property I'm looking at is about $65k. I plan to buy this property, and then continue to buy more properties once this one is rented, repeating the process over and over.

Would I be better off buying it with cash, and then getting a home equity line of credit (HELOC) to use as down payment for the 2nd house, or should I just put 20% down on the first house and take a regular mortgage for the rest?

@Lucas Cookson If you buy right so that you are no more than 70% or so all-in, you can theoretically repeat the process for many properties. But your rentals will have to be performing very well, or they will slowly impact your DTI as you add properties.

1.  Buy with cash (buy it right).

2.  Rehab.

3.  Rent.

4.  Do a cash-out refi.

5.  Repeat.

Talk with your bank first.  And stay in contact with them along the whole way.  Make sure that they are still good with giving you the cash-out refi before you even buy the next property.  Otherwise, you eventually get stuck with a property that you own free-and-clear but can't get any more money out of it.

"1. Buy with cash (buy it right)."

What do you mean by "buy it right"? 

Thanks for the tip about making sure the bank is ok with getting a cash out refi. I will definitely do that. I also understand what you mean about DTI. I'm taking into consideration all the variables of renting (maintenance, taxes, property sitting empty for a month, repairs due to a bad renter, etc).

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