Using HELOC to finance down payment

[Jeff Mousley]

I am just beginning the process to arrange my financing for purchasing my first investment property. I am able to obtain a HELOC for about $60k from the equity in my home. The ranges of houses I am looking at generally run from $60-$80k. Obviously, I do not have enough HELOC to pay cash, fix up, get reappraised prior to getting permanent financing. I would like to pay cash and the fix up work would drive the reappraisel to cover the 20% down payment from built in equity.

My option I'm considering now is to use the HELOC to cover the 20% down payment when I get the mortgage. When I calculate the NOI for this property should this also capture the monthly interest payment for the HELOC ? Should I also factor in the payment on the principal for the HELOC? Probably good chance the cash flow would be tough to be positive while covering that much. Any suggestions on this approach is appreciated.

[Jon Holdman]

If you can find a HOMEPATH property that works, they have great terms. Certainly worth doing if you can make it work, IMHO.