Onto 2nd Property - Best HELOC use?

Question

Greetings BP community!

This is my first post, so go easy on me :)

I recently purchased my first rental property. I did this the traditional route; tapped into savings for down payment and got a 30 year fixed mortgage.

Now I’m looking for my next one so I recently took out a HELOC on my primary residence for $120k.

My question is to how best use the HELOC to obtain more rentals. I’m looking for something repeatable so I can scale.

What I arrived at is using the HELOC as a source of down payments, which I figure will eventually run out - OR - I could BRRR. The only problem with BRRR is that my HELOC balance ($120k) doesn’t buy much in my area (Boston).

I’m at a bit of a strategical crossroad and looking for guidance. Or maybe I’m missing something altogether. Thank you.

Joe A. · Answer

Thanks @Larry T. I will likely use the HELOC for down payments and good call on the cushion. I’m thinking with appreciation (hopefully), I could sell off a place to pay off/down the HELOC and then have a fresh source of down payments again.

I know it’s good to have goals and think long-term, but I may just need to start somewhere and go one at a time - crossing bridges when I come to them.

Larry Turowski · Answer

@Joe Alcarez Yeah, if Boston is your target area then $120K isn't going to go very far--maybe not even a one property unless it is a great deal.  The HELOC is still great to have, though.

If you are averse to using other sources of money, private lending or hard money, then your best bet is just to use it for down payments.  Leave yourself a cushion, though, unless you've got other liquid funds to carry you 6 months, including your new properties.