Updated over 2 years ago on . Most recent reply
Home Equity to Purchase Investment Property - Good Idea?
Hello. As the title implies, I'm considering the idea of using a HELOC to purchase a first investment property. Any thoughts on this strategy?
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#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Ellsworth, ME
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#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Ellsworth, ME
A HELOC is a great short term debt instrument. If you don't have a plan to pay it off within a couple of years or force equity to refinance and knock out the HELOC, don't use it.
It's good for flips, BRRRRs, or a place holder if you find a screaming deal that you can't pass up until you get a big bonus or increase in income; however, it's not ideal as a down payment or purchase on a standard buy and hold. You're likely looking at close to a 100% financed property with at least part of it on a variable rate in that situation.