Hi, I'm just getting started in REI buy, hold, rent for passive income. I already own two homes both for primary and personal use. I only have about 20% equity in my personal vacation home but I'm about to pay off my primary residence home and assume at least 400K in equity. I was thinking about getting a HELOC on my primary maybe up to around $150K to either use as down payments on possibly up to 3 properties. Looking for some feedback on whether this is a good idea. My thought is these could be used for 20%-30% down payments on the properties while also giving me a tax right off on my primary. Looking for some feedback on pros, cons, people who have done the same. I little worried that after I take the HELOC I will have trouble qualifying for the mortgages on each.
I am personally a fan of HELOCs and like the flexibility they provide. Starting with the cons, the biggest risk is losing your home if your investment somehow goes totally awry and you cannot afford the monthly payments on the HELOC. Another con is that most HELOCs will have a variable interest rate so make sure that whatever you buy (if it is a buy and hold) can still cashflow at higher interest rates or make sure you can refinance and get your money out and pay off the HELOC for that property.
For pros, the ability to continually use the funds over and over if you so choose makes it a great benefit to use as down payments and even for rehabs as well.
Qualifying for it can be tough if your DTI is too or your credit scores aren't up to par so make sure all of that is in order before applying.
Best of luck going forward.