I am considering using a HELOC to put a 30% downpayment on my first rental property. Is this a bad idea ? I have about 100k just sitting there. I come from the Dave Ramsey school of thought. Taking out a loan to then get a mortgage has me questioning. I'm in the the VERY very early stages of learning. I apologize if I am beating a dead horse...
Really looking for advice or a point in the right direction.
@Jordan Gleason Hi Jordan! Using a HELOC to purchase rental property is a great way to creatively finance your purchase and "recycle" your equity.
However, it does come with the risk of being overleveraged and exposing your primary residence to an additional debtor.
However, if the prospective deal is a solid investment, you have adequate reserves, and you understand the risks involved, it can rapidly increase your portfolio.￼￼ Nowadays interest rates on HELOCs are fairly low (nothing like a primary loan, though) so that makes it even sweeter.
Hope that helps, and good luck!￼￼
@Dalyn Hazell - how big of a reserve are you referring too?
Again very new at this.
@Jordan Gleason No Problem. A conservative amount would be six months of expenses for each property. If you’re less concerned, you can take it down to three months or so.
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