HELOC on Primary Residence

[Nicholas Dillon]

Hello All,

I have around $200k in equity in my primary home. I own 2 other rental properties. I have a pretty large emergency fund in place for those properties, but I wonder if that capital could be better employed elsewhere (potentially acquire another property). At one point I talked to my financially advisor and he said that it would be smart for me to open a HELOC on the property, but not draw from it, except in the case of emergencies. What do you guys think about this strategy of opening up a HELOC in hopes of freeing up some of my other capital. Does this make sense? Thanks all of you guys for the assistance. Great community to bounce ideas off of as I build my knowledge base.

[Andrew Freed]

@Nicholas Dillon - Wow I am impressed. One of the very few times I heard a financial advisor provide good advice. Yes, definitely open up a HELOC even if you don't plan on using it. It normally doesn't cost you any money to open and to be able to access that large amount of equity to buy or stabalize your current portfolio allows you so much more opportunity costs.

For instance, I took a $200K LOC out on my primary residence when I first started in real estate. It was on a 1 bedroom condo in Boston. I utilized those funds to purchase 18 rental units. HELOCs are interest only hence on that $200K, it was a monthly interest rate of $1,200. Given that I utilized that $200K to buy over 18 units, the cashflow I received from those units far exceeded the interest on the HELOC. And that is how I got my portfolio started. Fast forward to today, I have over 275 doors. HELOCs are one of the best ways to get started building a real estate portfolio in my opinion. Best of luck on your journey!