To use home equity or not...?

[Jonny Morris]

We bought for about $363k. Put down 80k on the house to avoid mortgage insurance. We have now put about 50k into developing an apartment above garage as our "1st property" rental. The area is growing so I assume it will have risen accordingly with our developments. Recent city valuation puts house value about 60k+ from what we bought at. Question: I would like to use equity from our home to pursue a second investment. My wife sees this as a second mortgage. Any advice, numbers or light anyone can shed on my scenario?

[Kyle McCorkel]

Jonny Morris
I would recommend getting a line of credit (HELOC). They are low cost and low risk. If you don't need it, you just don't draw from it and don't make payments until you need it.

Then you can pay it off in the future, and rinse and repeat.

I would compare the monthly expense of the HELOC to the expected monthly cash flow from the new investment. If it is significantly positive (I'd say at least $200-$300) then it's a green light.

The other option is the use the HELOC as a revolving credit line to fund value add deals (either flips or BRRRR's). This gives you an exit strategy for paying off the HELOC. And you can keep re-using it in the future.