Is HELOC a Smart choice for Down Payment on New Investment Prop?

Question

Hello,

I'm a Realtor and also New Investor. My Wife and I have a HELOC for 80K to invest in a Rental Investment Property. We live in the BOISE market and have see Home prices Climb Steadily as well as record move-ins to the area. Home prices are climbing at a faster rate than local income levels; thus requiring locals to rent.

Here is my delima:

We want to eventually keep our current home as a rental, and buy another house for our family elsewhere. Our current home's set up as a Duplex and we have have a renter on the other side of our Home who pays $1000/Mo. We want to use the HELOC on this home as a down payment on a new rental investment and quickly fill it with renters to make the mortgage on the 2nd property.

Here is my question:

After taking these steps and having 2 rental home with rents coming in, would a lender still be willing to loan on a New Personal Mortgage for our personal residence (home #3)?

Greg Dickerson · Answer

@Casey Spence  Lenders will not allow you to borrow the down payment from an equity line or anywhere else when using a Bank or conventional loan. There may be a local bank that will allow this but I have not heard of any. You would have to get owner financing. Lenders want to see the down payment come from your bank account from Cash savings or investment funds etc.

To answer your second question yes if your rental properties pay for themselves you can still borrow for a primary residence.