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Updated about 5 years ago on . Most recent reply

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9
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3
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Derek Cirino
  • Rental Property Investor
  • Boston, MA
3
Votes |
9
Posts

HELOC on primary residence to invest?

Derek Cirino
  • Rental Property Investor
  • Boston, MA
Posted

So I am getting closer to jump in with my first investment. I have cash ready to go but I also have the option to pull out a significant amount of equity from my primary residence by using a HELOC. My question, is it a terrible idea to use a HELOC on 1st as money to invest?

The way I understand it is owning a home is a forced savings account.  I'd rather take out that money and put it to work...

PS: The HELOC rate is 3.25%

Thank you

-Derek

Most Popular Reply

User Stats

64
Posts
69
Votes
Emma Powell
  • Investor
  • Orlando FL
69
Votes |
64
Posts
Emma Powell
  • Investor
  • Orlando FL
Replied

We are huge fans of the HELOC to fund investments and put a 1st lien HELOC on our primary home as well as one rental home that we use as our "sweep accounts" for personal finance and the business. Everything else has mortgages for now. I borrowed from the rental HELOC to be the earnest money partner on a small apartment syndication I am sponsoring, as well as to BRRR a few smaller properties as sole owner this year. It's been great.

I'd say our only concern is the added risk on the personal home, if you're willing to sell it or house hack if it gets over leveraged. For us, I am always up for moving and love house hacking, so we are using the personal home HELOC to make some improvements to the personal home to put an apartment in and rent it out.

A family member paid off her home, put a 1st lien HELOC on it, planning to pay cash for a rental for speed and ease of transaction, refinance, then recycle the funds acting as her own "hard money" on BRRR projects. Lots of options.

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