Need Advise on HELOC

[Anjali A.]

Hello fellow investors and PRO's

I am looking to add another rental to my portfolio. I need advise on if I should buy another rental with a new home investment loan or is it better to get a HELOC.

Thanks so much.

[Denis F.]

I agree with @Brent Coombs, try to look a little deeper in your tax return. If you have a tax accountant already, verify that he/she is expert in real estate deductions (track your mileage and expenses, depreciation, loan interest deduction...) and ask for simulations. Personally, I've spent the time so far to learn how to take care of my own taxes. I buy the software (not the online version) so I can run scenarios anytime during the year and figure out what works best for me.

From your numbers, it looks like you could take a $200k HELOC on your home but HELOC has variable interest rate. Since interest rates are still relatively low, you could secure a long term investment loan if you are a long term "buy and hold". I did both: I use the HELOC for down payment and emergency funds and get a 30 years fixed on each property. Then I payoff my HELOC as fast as possible so I can do it again.

My HELOC had no setup fee and the appraisal was paid by the bank so even if I didn't make use of it, I would only have wasted the time to submit and sign paperwork.