Do HELOCs make any sense right now?

Question

I have a good bit of equity within my home (~450k).   I am considering getting a HELOC to pull 75-100k for a 25% downpayment on a rental property.  Awaiting an answer from my banker on what their current rate is on a HELOC (smaller local bank that tends to be investor friendly).. curious what thoughts are on HELOCs in general right now for such things?

Craig Warner · Answer

Really it's your own decision, but if you have zero money for a downpayment and your goal is to purchase an investment property now, a HELOC could be a good short-term solution. The last few years we have closed many HELOC's and HELOAN's, as it made more sense for borrower not to refinance out of their low rate 30 year fixed loan.

Everyone is using the HELOC for different purposes. The more leveraged secured debt you have will impact any cash flow.

As mentioned by Nicholas, the BRRRR method could help payoff the HELOC too.

Nicholas L. · Answer

@Maxwell Hines

short term - BRRRR method, for example.

buy with cash or hard money, rehab with HELOC money, then refinance and pay it all back.

you never want a HELOC as part of a long term situation.

Maxwell Hines · Answer

Figured that'd probably be the case.  Ty sir

When would a HELOC ever make sense??

Nicholas L. · Answer

@Maxwell Hines

makes no sense - you'll be negative and never be able to pay the HELOC draw back with the cash flow you don't have from the house