Using HELOC to buy more prooerty

[Joshua Hollandsworth]

Talk to me like I'm 5. When purchasing a new rental property, can I pull A HELOC to put a down payment on another rental property? What are the Pros/Cons/Challenges I will face? Thanks!

[Cara Lonsdale]

So, my guess is that you OWN a rental property (Property A), and you want to take out a HELOC/2nd loan on it to purchase a second property (Property B). Is that correct?

So, in order to do any type of cash out on an investment property, you need to have owned it for at least 6 months. Then you need to have enough equity in the property to allow for a HELOC/2nd loan. (so current loan + proposed HELOC/2nd loan < 78%). So WITH the new proposed loan, do you still have a 20-22% equity position in property A that can be confirmed by an appraisal?

If YES is the answer, you shouldn't have a problem taking out the money either through a refi, or 2nd loan.  Once you get the money, put it in the bank and let it season for 2 bank statements before you contact the bank to refi.

If NO, then you have to wait it out.  You don't have enough equity to do it yet.