Pros and Cons of Heloc?

Question

So I have heard about Helocs from the webinars and podcasts presented through  Biggerpockets. I googled the benefits and negatives of using a Heloc but I'm still unsure if its worth it.   Just wondering if anyone had experience with using a Heloc for the down payment on an investment property? Are you able to get a fixed interest rate when applying for a Heloc?  Are they worth the risk if the interest rate is volatile?

Matt Leber · Answer

@Joshua Zlatkin I have a 4% fixed rate HELOC on my primary. So far we have kept a zero balance but it’s nice to have some cash on the sidelines in the event a slam dunk of a deal comes my way or a large CapEx item on one of my rentals.

Joshua Zlatkin · Answer

@Matt Leber Thanks for the response, I really appreciate it.  How is the rental market in Orlando? I'm considering making a purchase in a planned community down there. I would like to find as much information as I can on the real estate market since I don't currently live in the area.

Jay Hinrichs · Answer

ONly use it for short term financing.. used correctly its a nice tool in your tool belt.

down side is they can be frozen and called all due by the lender in the lenders SOLE discretion.

so the risk is you have a 100k remodel going you pull 50k from heloc  bank freezes it were are you going to get the other 50k ?

this is exactly what happened to thousands of investors from 08 to 2012 who were counting on these loans only to have them frozen.

Not saying its going to happen again.. but do read the fine Print in the Note and Mortgage so you understands the banks rights.

Chris T. · Answer

Our investing took off once we got a HELOC on our primary. Key thing is the ease of accessing the capital. It's easy to qualify, cheap but it's also variable, so it's meant to be short term.

Cash out the property with a 30 year fixed, and do it again!

There may  be some banks that have fixed HELOC terms, so you can shop around.

Pros and Cons of Heloc?

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