Is Using a HELOC to Fund My First Rental Property Too Risky?

[Chavin Peebles]

Hey everyone, I’m new to real estate investing and looking to purchase my first long-term rental. I’ve owned my primary residence for 4 years and currently have around $100K in equity. The main goal is to build long-term wealth through rental income and eventually pass that on to my kids.

I’m considering using a HELOC to either cover the down payment or potentially purchase a property outright, but I’m unsure if that’s the smartest or safest move for a first investment.

Would appreciate input on:

• Is using a HELOC too risky for a first-time investor?
• Have you used home equity to fund a rental, and what was your experience?
• Would you recommend starting with a duplex or single-family rental?
• If you could go back to your first property—what would you do differently?

I’ve got strong credit, stable income, and I’m committed to taking action—but I want to make sure I’m moving strategically. Appreciate any insights you can share.

[Mike D.]

This is a time tested strategy, but it works a lot better with lower interest rates. Right now, it's hard to cashflow without a substantial, real down payment (i.e. not a chunk of equity that you are paying interest on). If I were in this situation, I'd save up enough to make sure you can cashflow. Unfortunately this isn't the kind of environment where you can finance everything you own to the hilt in order to invest in more properties, at least not without taking on lots of negative cashflow, which is probably not the thing to do when you're just starting out.