HELOC loan to aquire more rental property’s

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HELOC loan to aquire more rental property’s

Cameron DavissonPro Member
Member since 2023 · 5 posts · 0 votes

Hi,

I was wondering if I can/should use a HELOC loan to aquire more rental properties? I just closed on my first rental property last month in Clarksville Tennessee. I know I would need at least 6 months for seasoning, but wondering if it would be smart to use a HELOC to aquire more property and increase my portfolio?

Thank you!

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Brian Lewis
Lender · Cleveland, OH · Member since 2023 · 24 posts · 25 votes
8mo

Hi Cameron, YOu can use HELOC's to acquire more rentals, but whether you should depends on how conservatively you use it.

But keep in mind that HELOCs on rental properties are harder to get than on a primary residence. fewer lenders, lower LTVs, higher rates, and stricter seasoning.

If you go this route, stress test for:
-Variable rates
-Strong cash flow coverage
-A clear exit plan (HELOCs work best as short-term/bridge capital)
-Portfolio-level risk

Used conservatively, HELOCs can help you scale. Used aggressively, they can create real risk.

Hope that helps!

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  • Brian Lewis
    Lender · Cleveland, OH · Member since 2023 · 24 posts · 25 votes
    8mo

    Hi Cameron, YOu can use HELOC's to acquire more rentals, but whether you should depends on how conservatively you use it.

    But keep in mind that HELOCs on rental properties are harder to get than on a primary residence. fewer lenders, lower LTVs, higher rates, and stricter seasoning.

    If you go this route, stress test for:
    -Variable rates
    -Strong cash flow coverage
    -A clear exit plan (HELOCs work best as short-term/bridge capital)
    -Portfolio-level risk

    Used conservatively, HELOCs can help you scale. Used aggressively, they can create real risk.

    Hope that helps!

    1Reply
  • Simmy AhluwaliaPro Member
    Lender · Atlanta, GA · Member since 2015 · 1k+ posts · 200 votes
    8mo

    @Cameron Davisson - actually if you made improvements to the property, then you are able to cash-out immediately without any seasoning requirements.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    8mo
    Quote from @Cameron Davisson:

    Hi,

    I was wondering if I can/should use a HELOC loan to aquire more rental properties? I just closed on my first rental property last month in Clarksville Tennessee. I know I would need at least 6 months for seasoning, but wondering if it would be smart to use a HELOC to aquire more property and increase my portfolio?

    Thank you!


    Just be aware that if you are using funds from a heloc for a down payment on a DSCR type loan, that will be challenging as most lenders do not allow for helocs to be used as down payments. There are I am sure some out there that may, but most do not allow it

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 505 votes
    8mo

    There are shorter seasoning windows. It will depend on the lender as to how short the seasoning window is. Among other factors, it will also depend on the state the property is in (different states can have different guidelines), how much rehab was done and how much that increased the ARV relative to the previous purchase price.

    Using a HELOC depends on what you will be buying with it, what your cash flow will be and how long you will draw the cash before paying it back. There are DSCR loan programs that allow a HELOC to be used- there's specific rules around it and it's best to talk to a mortgage professional to check on DSCR program guidelines as they vary by lender. Happy to connect to discuss further.

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  • Pierre Guirguis
    Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes
    8mo

    Using a HELOC can be a useful tool, but it’s usually most effective once your first deal has proven it can operate cleanly for a full cycle. Early on, portfolios are more sensitive to vacancies, maintenance surprises, and rate changes especially with variable-rate debt.

    Before re-leveraging, I'd make sure the first rental is fully stabilized, cash-flowing conservatively, and that you have enough liquidity to handle surprises without relying on the HELOC itself. The goal is optionality, not pressure.

    Leverage accelerates growth when the foundation is solid. Too early, it tends to compress margins and increase stress more than returns.

    1Reply
  • Brian MillerPro Member
    Real Estate Agent · St. Louis, MO · Member since 2019 · 58 posts · 45 votes
    8mo

    I used a HELOC to purchase my first two duplexes in St. Louis, Missouri in 2018 and it was a great decision. The HELOC was on my primary residence, and the funds were used as my down payments for the conventional loans.

    I was getting around $500 of cash flow per month after loan payments, HELOC payment, and utilities. Every month I paid as much as I could to get the HELOC balance down. The HELOC interest was tax deductible since it was used for an investment property.

    Two tenants moved out within two years of owning the properties so I rehabbed the units myself, and significantly increased the rents allowing me to pay back the HELOC faster. I went the HELOC route because I knew my home was not my "forever home", and sold my primary residence a few years later which paid off the HELOC.

    Doing this allowed me to purchase the properties without tapping into my own personal funds. Rents covered the rehabs, repairs, and monthly loan payments. The two duplexes are now worth double what I paid for them, and most of the rents have doubled since I purchased them. 

    I'll add that this done before the covid RE bump. My conventional interest rates are 5.5%, and we sold my primary home in 2023 while the market was still peeking. Your results may vary given the different current market conditions and your situation. 

    In this market, you could look for a value add rental that you could deploy your HELOC for the down payment and rehab costs for forced appreciation. Hold it for a period of time, raise rents, then refinance your loan to pull some cash out and pay down the HELOC. There are some moving pieces, but it can be done!

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