HELOC to purchase investment property

[Shane Fujimoto]

Aloha all!! Last year my wife and I did a cash out refi on our primary residence, and removed my name from title, which gave us 400k. I used that 400k on a downpayment for me as a primary residence on a 863k home which I will be renting out after the seasoning period (both homes will be placed in a trust). I recently took out a HELOC on my primary residence for 400k and used 100k for PML at 12% interest, and payed taxes. I have about 250k to use on an investment property which is listed for 175k, a townhome on the westside of Oahu. This townhome will cash flow about $700 after paying interest on my HELOC for the 175k. The reason I'm thinking of using my HELOC to fund the entire purchase is that I can make a cash offer and close on this deal quicker but also make my offer more attractive - its pretty competitive here in Hawaii. My question is should I use my HELOC to fund the whole investment property or do a DSCR loan and put down 20 to 25%? The problem with that would be time consuming. I will later do either a cash out refi or a new HELOC to pay off the original HELOC. Any feedback, ideas and suggestions would be much appreciated as I'm new to this game.

Mahalo,

Shane

[Zach Wain]

@Shane Fujimoto - Nice set up!  If you can get a better deal by buying cash, do so.  If not, get a conventional mortgage with 25% down to get the best rate possible if its a long term hold.  

If you go all cash - you can still refinance immediately after and get a conventional loan, its called Delayed financing. You can do this before the standard 6 month wait period if you pay all cash. The lender will require you to pay back the HELOC, but that is no problem, even if you want to take the money out of the HELOC a few weeks after. There is a "cash out price hit", but its very minor if you have a good credit score. That is how I would play it