Use a HELOC to buy investment?

Question

I own my home outright and I’m wondering if using a Heloc to buy investment property is a good idea.

I do have cash in savings a d investment accounts too.

Please help. Thanks

Allen McGlashing · Answer

@Amber Hagen

HELOCs are a great way to fund deals at a low interest rate to borrow. I currently have a HELOC out on my home to fund my real estate investments. I would take out as much money you can and buy cash-flowing assets that will pay the HELOC off and put money into your pocket.

What I’m doing is I took a HELOC out with a 5yr draw period where it’s interest only payments and a 15 yr repayment plan. My plan is to implement the BRRRR method on a couple properties in that 5 years. Once the draw period is over I will have paid the HELOC off and will be trying to open another one.

Feel free to message me if you have any question. GOOD-LUCK

Amber Hagen · Answer

Hi. I’m in Chattanooga TN. Just buying our first property with our own cash as down payment. Thanks for your response. I’m curious about other ways to finance besides watching all my cash go away 😂

Patrick M O'Neal · Answer

Interest rates right now are incredibly low. You could refinance your home and use that equity in order to purchase your next investment. That interest rate will certainly be lower but you will have more closing costs compared to getting a heloc. HELOCs are variable and  follow the prime rate but have like no closing costs. I guess it depends on how long you would like to have the loan. If it were short term, I’d go heloc. Long term, a big cash out refi.

Amber Hagen · Answer

Thanks everyone!

Troy Miller · Answer

Hi Amber. My wife and I are investors in Chatt too. I use a HELOC from our primary residence for investing, as well as some savings and a lot through Hard/Private Money Loans. Those are all avenues that can work for investing, it just depends on the deal and what else you have your money in right now. Patrick's note about HE refinancing vs HELOCs is a helpful one...each one has a cost to it so it (again) depends on the deal you are looking at and the goal(s) you have. BTW, if your savings/cash is in another investment, there is still a "cost" for pulling it out of that and putting it in RE. If you want to connect locally, my wife and I would be glad to meet up with you sometime. Best of luck getting going!

Maksu Ize · Answer

Nothing wrong with using heloc. Especially if you have savings as insurance.

The bonus of heloc, is that you can write it off.

Go for it

Ryder Cotton · Answer

Hey Amber, I hope you're doing well. Would this be your first investment purchase? IMHO, if you're able to use your cash that's spread elsewhere, I would use that first. As you become more experienced, then I would look into leveraging my personal residence. Maybe it's better to keep your primary residence off the table for a while longer. Where are you located?

Use a HELOC to buy investment?

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