Heloc on investment property for more investment properties

Member since 2023 · 5 posts · 2 votes

I purchased a SFH as an investment property - I'm reading here there some CUs and banks who will allow a 80% heloc (in order to get cash for another investment ) . Is this not a preferred purpose .? When asked by banks what the heloc is for - is it ok to note other/ cash for investments ? How long does one have to own the home to apply usually? The home has equity as we bought for below market

Thanks !

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y
Quote from @Nicole Ferrara:

Let's say you get a HELOC for $100,000 to purchase another investment. If the interest rate on that HELOC is 7% and your investment makes a 10% return, you are only getting a 3% return on the $100,000 you invested. That's not worth it.
So many people push investors to borrow against their equity, borrow from grandma, borrow, borrow, borrow!
I think this is a terrible practice pushed by a greedy society. True wealth is built over time. Increase earnings, reduce expenses, save, invest. That's the simple path that works every time.
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Nicole Ferrara
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Member since 2023 · 5 posts · 2 votes
2y
I appreciate that insight . I agree that the investment into another property isn’t worth it . I do have an empty lot next to my current SFH , doing nothing (but costing me money to mow :))
my thought was to build a detached guest cottage to serve as an overflow for guests or it could also serve as a seasonal / monthly rental. My guess it would also add some value to the primary residence . The costs involved are about $100.000 all in (permits, engineering, architects labor , materials ) - I’m thinking that would be a better long term Investment than another SFH .
I’m guessing I could use the heloc for those purposes as well ? Thoughts ?
Quote from @Nathan Gesner:

Quote from @Nicole Ferrara:

Let's say you get a HELOC for $100,000 to purchase another investment. If the interest rate on that HELOC is 7% and your investment makes a 10% return, you are only getting a 3% return on the $100,000 you invested. That's not worth it.
So many people push investors to borrow against their equity, borrow from grandma, borrow, borrow, borrow!
I think this is a terrible practice pushed by a greedy society. True wealth is built over time. Increase earnings, reduce expenses, save, invest. That's the simple path that works every time.

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