All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Buying & Selling Real Estate Followed Forums Landlord Forums & Rental Property Questions New Member Intros Newest Posts Trending Discussions See All
  • Education

    Read

    Guides Member Blog BiggerPockets Blog

    Watch

    Webinars Video Library Free Courses

    Listen

    BiggerPockets Podcast The Money Show Podcast BiggerPockets Business Podcast

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Companies Real Estate Agents Hard Money Lenders Investment Companies Mortgage Lenders Contractors

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    Landlord Resources
  • Marketplace
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    The Intention Journal Buy, Rehab, Rent, Refinance, Repeat The Book On Rental Property Investing See all books

    Real Estate Forms

    Lease Agreement Package

    Featured Book

    The House Hacking Strategy book cover
    The House Hacking Strategy

    Discover why so many successful investors support their investment careers with house hacking—and learn from a frugality expert who has “hacked” his way toward financial freedom!

    Get the book now
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books New York
ForumsArrowCreative Real Estate Financing ForumArrowUsing a HELOC to buy an investment property
  • Newest Posts Arrow Down Light
    • Newest Posts
    • Unanswered Discussions
  • Trending Arrow Down Light
    • Top Discussions
    • Trending Discussions
  • Loans & Credit Arrow Down Light
    • Local Real Estate Forums

      Real Estate Forums near you

      • New Haven Real Estate Forum 133 Posts 20 Discussions
      • Allentown Real Estate Forum 445 Posts 65 Discussions
      • Norwalk Real Estate Forum 11 Posts 0 Discussions
      • Cambridge Real Estate Forum 48 Posts 7 Discussions

      View all Local Real Estate forums

    • General Info
      • BiggerPockets Exclusive PRO Area 17K Posts 3.2K Discussions
      • BiggerPockets Business Podcast 170 Posts 21 Discussions
      • BiggerPockets Money Podcast 709 Posts 52 Discussions
      • Real Estate Success Stories 81K Posts 3.9K Discussions
      • Real Estate Quizzes 707 Posts 21 Discussions
      • New Member Introductions 516K Posts 58K Discussions
      • FAQ Forum 150 Posts 10 Discussions
      • BiggerPockets Webinar Discussion Forum 500 Posts 17 Discussions
      • BiggerPockets Summer Reading List 165 Posts 28 Discussions
      • Questions About BiggerPockets and Official Site Announcements 44K Posts 4.3K Discussions
      • Real Estate Not-So-Successful Stories 833 Posts 55 Discussions
    • General Real Estate
      • Home Owner Association (HOA) Issues & Problems Forum 6.6K Posts 970 Discussions
      • Military Investing 7.0K Posts 674 Discussions
      • Do it Yourself 35K Posts 3.8K Discussions
      • Buying & Selling Real Estate Discussion 488K Posts 68K Discussions
      • Investor Deal Diaries 19K Posts 1.0K Discussions
      • Construction & Remodeling Diaries 9.0K Posts 1.4K Discussions
      • Completed Deal Diaries 19K Posts 6.2K Discussions
    • Reviews & Feedback
      • Real Estate Guru, Book & Course Reviews and Discussions 29K Posts 3.1K Discussions
      • Ask About A Real Estate Company 26K Posts 2.8K Discussions
      • Real Estate Deal Analysis and Advice 141K Posts 20K Discussions
    • Investor Basics
      • Real Estate Investor Marketing Help & Advice 50K Posts 6.9K Discussions
      • Investor Psychology 23K Posts 1.7K Discussions
      • General Real Estate Investing 160K Posts 21K Discussions
      • Starting Out 364K Posts 52K Discussions
    • Landlord & Tenant Forums
      • Renters Discussion 46K Posts 5.3K Discussions
      • Landlord Forums & Rental Property Questions 436K Posts 48K Discussions
    • Foreclosures
      • General Foreclosure & Pre-Foreclosure Forums 36K Posts 5.8K Discussions
      • REOs 18K Posts 2.3K Discussions
      • Short Sales Questions 17K Posts 2.2K Discussions
      • HUD, VA, and Tax Sales 11K Posts 1.6K Discussions
      • Get Foreclosure Help - Stop Foreclosure Forum 6.8K Posts 946 Discussions
    • Real Estate Strategies
      • Real Estate Wholesaling Questions & Answers 151K Posts 20K Discussions
      • Rehabbing and House Flipping 124K Posts 15K Discussions
      • Tax Liens, Notes, Paper, & Cash Flows Discussion 39K Posts 4.4K Discussions
      • Short-Term and Vacation Rental Discussion 35K Posts 2.9K Discussions
      • Innovative Strategies 34K Posts 4.5K Discussions
      • Real Estate Development & New Home Construction 21K Posts 2.9K Discussions
      • 1031 Exchanges 10K Posts 1.6K Discussions
      • BRRRR - Buy, Rent, Rehab, Refinance, Repeat 935 Posts 131 Discussions
      • Rent to Own a.k.a. Lease Purchase, Lease Options 17K Posts 2.6K Discussions
    • Commercial Real Estate
      • Mobile Homes & Mobile Home Park Investing 22K Posts 2.7K Discussions
      • Commercial Real Estate Investing Forum 42K Posts 5.5K Discussions
      • Multi-Family and Apartment Investing Forums 133K Posts 14K Discussions
    • Business Basics
      • Goals, Business Plans & Entities 28K Posts 3.9K Discussions
    • Real Estate Technology and the Internet
      • Real Estate Technology, Social Media & Blogging 18K Posts 2.6K Discussions
    • Loans, Mortgages, Credit Lines
      • Real Estate Crowdfunding Forums 6.1K Posts 417 Discussions
      • Private Lending & Conventional Mortgage Advice 122K Posts 16K Discussions
      • Creative Real Estate Financing Forum 60K Posts 8.9K Discussions
    • Financial, Tax, and Legal
      • Tax, Legal Issues, Contracts, Self-Directed IRA 117K Posts 17K Discussions
      • Property Insurance Questions & Discussions 12K Posts 2.1K Discussions
      • Personal Finance Forum 23K Posts 2.5K Discussions
    • Real Estate Professionals
      • Bankers, Lenders, and Mortgage Brokers 14K Posts 2.1K Discussions
      • Contractors 20K Posts 4.1K Discussions
      • Real Estate Agent Forums 54K Posts 7.7K Discussions
    • Real Estate Marketplace
      • Marketplace 238K Posts 94K Discussions
      • Real Estate Events and Happenings 70K Posts 17K Discussions
    • Off Topic
      • BiggerPockets Real Estate Investing Summit 2.1K Posts 118 Discussions
      • Off-Topic 45K Posts 5.8K Discussions
      • Housing News & Real Estate Market Discussions 16K Posts 1.9K Discussions
Start a Discussion

Using a HELOC to buy an investment property

22 Replies

  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
Rotate Log in or sign up to reply
  • 1
user profile avatar
  • Posts 31
  • Votes 7

Andrew Marzec
Contractor from Hoboken, New Jersey

posted almost 3 years ago

Hi All,

My parents have been kind enough to offer me access to a HELOC on their primary residence. I have been buying student rentals and been doing well so far. They have seen my success and offered to help me grow even further. Has anyone had any experience paying for an investment property (in full) with a HELOC? I have seen a lot in the forums about using a HELOC for the down payment but have yet to see a thread about buying an investment property outright using one. Is it allowed/possible? Any advice is greatly appreciated. Thanks!!

Rotate Log in or sign up to reply
user profile avatar
  • Posts 14K
  • Votes 13K

Thomas S.

replied almost 3 years ago

Of course you can pay cash (HELOC) but why would you want to. It is not the most financially advantageous to have equity sitting dead in a rental. Equity (cash) valued generally at about 10% kills a properties cash flow. Far wiser to mortgage to the maximum when rates are only 5% rather that bury cash worth 10%.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 31
  • Votes 7

Andrew Marzec
Contractor from Hoboken, New Jersey

replied almost 3 years ago

Greg S. Thank you Greg. So since I don't want to tie my money up in this property would you suggest using the HELOC for the 20% down and then mortgage the remainder?

Rotate Log in or sign up to reply
user profile avatar
  • Posts 14K
  • Votes 13K

Thomas S.

replied almost 3 years ago

Yes. Chances are the HELOC and mortgage rates will be close to the same. What you are doing in essence is spreading your money around and buying income properties with 100% financing. Return is infinite.

The theory that paying down a property with a DB in order to have positive cash flow is false economics. Cash in a property does not increase or create cash flow because of the fact that the cash must earn a return separate from the property itself.

A income property that does not produce positive cash flow with 100% financing will never have TRUE positive cash flow. Paying down a mortgage creates false cash flow, smoke and mirrors.

I invest and use my HELOC as my business working account, income in, expenses out. I do not hold any cash or emergency funds as long as I leave room in the HELOC.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 236
  • Votes 108

John Powell
Real Estate Agent from Kennesaw, GA

replied almost 3 years ago

@Andrew Marzec I have used a heloc to buy a property out right. I then used the heloc to rehab it get a tenant in it and season it. As soon as I could I did a refi on the rehabbed property paid the heloc off then repeated. If your fast enough you may be able to do delayed financing on the rehab so you don't have to season the rental.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 31
  • Votes 7

Andrew Marzec
Contractor from Hoboken, New Jersey

replied almost 3 years ago

Greg S. @John Powell Thank you both for your input it is greatly appreciated!

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Rentals and Team
  • Posts 548
  • Votes 525

Kyle M.
Rental Property Investor from Hummelstown, PA

replied almost 3 years ago

What @John Powell said. If you have enough to buy cash and rehab, just use the HELOC as nice, cheap short term money. Then refi and repeat. It's a beautiful thing.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 2.5K

Brent Coombs
Investor from Cleveland, Ohio

replied almost 3 years ago

@Andrew Marzec , I'm not convinced your Lender would be happy to grant you 100% financing, given that you would be up for repaying your parents' HELOC too, right? ie. YOUR Lender can't come after your parents' primary if you renege (ie. only your parents' Lender could).

On the other hand, if your parents want to GIFT the money to you, then they/you need to make sure the IRS is completely apprised of that situation.

(If I'm wrong about any of that - please let me know how). All the best...

Rotate Log in or sign up to reply
user profile avatar
  • Posts 31
  • Votes 7

Andrew Marzec
Contractor from Hoboken, New Jersey

replied almost 3 years ago

@Kyle M. The HELOC is 100k and the properties I buy are 60k-80k depending on how many bedrooms. I am investing in upstate NY. Not sure how long I would have to wait to refi but it does sound like a very good idea. The fact that I could repeat this strategy over and over is excellent as well. Thanks!

Rotate Log in or sign up to reply
user profile avatar
  • Posts 236
  • Votes 108

John Powell
Real Estate Agent from Kennesaw, GA

replied almost 3 years ago

search delayed financing it is when you close with cash then quickly get financing in place. It is a goood option if you want to be able to move very fast on a close, do repairs to run guy up to a financeable condition and get a lease in place. I'm not sure on the time lines. 

Rotate Log in or sign up to reply
user profile avatar
  • Posts 38
  • Votes 11

Michael J Bensimon
Investor from New York City, NY

replied over 2 years ago

You can't use your parent's HELOC as funds for a down payment on an investment property. The funds would have to be considered a gift, and they would need to sign a letter stating as much.

And unfortunately, you can't use gift money to buy an investment property.  

You can get around this by putting your parent's on the mortgage with you. The funds would no longer be considered a gift, and would be allowed for the down payment. 

Rotate Log in or sign up to reply
user profile avatar
  • Posts 403
  • Votes 200

Michael Evans
Investor from Lancaster, California

replied over 2 years ago

Run the numbers. If the numbers make sense, then use the HELOC. If they don't make sense, then don't use it. You need an evaluation system. We have a deal management system where we run every single property through it and it allows us to adjust using a 1st and a 2nd, different down payment amounts, different interest rates and terms (interest only versus amortized) and different costs and points.

I can tell you this: Using leverage, even for buy and hold properties, when done correctly will supercharge your returns.  If you are able to do 100% financing of all costs and generate just $50 net income per month, that is an infinite return on your investment.  Give me as many of those deals as possible please.  The risk with leverage s being overly levered when the market turns an your vacancies increase, your rental income decreases and you don't have enough income to cover your expenses (negative cash flow).  But there are ways to manage and shift that risk.  PM me if you have further questions.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Traditional Financing and Real Estate Finance
  • Posts 260
  • Votes 143

Christian Nachtrieb
Rental Property Investor from Medford, MA

replied over 1 year ago

@John Powell I know this thread's a little old but John I wanted to ask you a quick question regarding HELOC's for downpayment. I'm looking to do the same thing.. so the only way to get your money back to repay the HELOC is if you refinance AND the property has gained enough value, correct? Otherwise, what happens if I'm stuck paying interest on my HELOC, has that ever happened to you? Wondering if anyone might mind sharing some not-so-perfect endings using this method.

Thank you all!

Rotate Log in or sign up to reply
user profile avatar
  • Posts 71
  • Votes 14

Joe Bourguignon
Investor from Portland, Oregon

replied over 1 year ago
Originally posted by :

so the only way to get your money back to repay the HELOC is if you refinance AND the property has gained enough value, correct?

 Christian, for investment properties, you want to find something to buy that is under market value, that way you have instant equity in the home when you buy, and you don't need to cross your fingers that it'll appreciate (like everyone was crossing their fingers in 2007...)  So, search hard for a property that's undervalued, and that's how you make your $$.  

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 2.5K

Brent Coombs
Investor from Cleveland, Ohio

replied over 1 year ago

@Christian Nachtrieb , if you're trying to use the "BRRRR strategy", you do want "the property to have gained enough value" for all your deposit (whether HELOC or cash) to be returned via the refi. Nonetheless, the numbers should have already been calculated to show that the property would still cash flow anyway! ie. So what if you're "stuck paying interest on your HELOC"?...

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Traditional Financing and Real Estate Finance
  • Posts 260
  • Votes 143

Christian Nachtrieb
Rental Property Investor from Medford, MA

replied over 1 year ago

Hey @Brent Coombs that makes total sense on all accounts, and based on my numbers the property WOULD still cashflow paying the HELOC interest. My primary concern is after the 10 years of interest only payments the principal then comes into play. I guess my question is, is it better to find a way to pay off the HELOC at all costs and avoid those bigger payments, or just plan for having the HELOC for its entire lifespan?

Thank you SO much for your help. Really appreciate it Brent!

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 2.5K

Brent Coombs
Investor from Cleveland, Ohio

replied over 1 year ago

@Christian Nachtrieb , "interest only payments" (for the loan balance)? Yes, I reckon you should want to Refinance out of such an interest-only loan soon, into a normal fixed amortization over as long a period as possible. I'm not a fan of 5 or 10 year "balloons". And yes, you want that Refi to cover paying out your HELOC too (so you can re-use it for your next investment)! Cheers...

Rotate Log in or sign up to reply
user profile avatar
  • Posts 2
  • Votes 2

Kevin Tramonte

replied over 1 year ago

my bank offers a HELOC at a fixed 4.75% for P & I, as well as the interest only option at 5%...both for 10 years. I plan to use my extra disposable job related income to pay down my HELOC (20K)...and around 8 months have my entire LOC back. Is this better than the interest only option payment?

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 2.5K

Brent Coombs
Investor from Cleveland, Ohio

replied over 1 year ago
Originally posted by @Kevin Tramonte :

my bank offers a HELOC at a fixed 4.75% for P & I, as well as the interest only option at 5%...both for 10 years. I plan to use my extra disposable job related income to pay down my HELOC (20K)...and around 8 months have my entire LOC back. Is this better than the interest only option payment?

If you're always intending to reuse your HELOC in this way, why would you want to still owe $20k at the end of 10 years (after they've foreseeably closed it off)? Welcome to BP.

I reckon interest-only loans should only ever be used by folk who cannot afford to pay extra dollars per month than the barest minimum required. 

(Or, folk who choose to not pay extra because of their investments' expected appreciation).

Meantime, do you mind sharing what the $20k HELOC is for in the first place? (And next time?)...

Rotate Log in or sign up to reply
user profile avatar
  • Posts 2
  • Votes 2

Kevin Tramonte

replied over 1 year ago

Plan is to get 60k HELOC, then use 20-25k for down payment on rental property and get conv loan for remainder of balance on rental. Pay down my HELOC and be on sidelines for next rental opportunity...trying to learn the best strategy for using HELOC...goal is rentals.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 10
  • Votes 4

Brian Cox
Rental Property Investor from Willow Grove, Pennsylvania

replied over 1 year ago

Hey @Kevin Tramonte - I'm evaluating doing the same strategy by using a HELOC.

I just found this thread - how has everything worked out for you so far? 

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Taxes & Accounting and Team
  • Posts 159
  • Votes 27

Cliff T.
Rental Property Investor from San Francisco, CA

replied over 1 year ago

Hey @Brian Cox - using a HELOC as a downpayment or to purchase additional properties is a common REI strategy. Just make sure to run the numbers in detail and not use your HELOC for any frivolous items, and you should be OK. There is, of course, additional risk by leveraging up but many feel like this is the best way to quickly build up one's portfolio.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 9
  • Votes 2

Levi Borunda
from Albuquerque, New Mexico

replied over 1 year ago

I've just come into a 100k HELOC, and what I'm reading here is that I can use some of these funds for down pymt, and then finance a mortgage? Won't the bank frown on loaning me money on property, as I've already got a primary mortgage and now a HELOC? Thanks friends for answers!

Rotate Log in or sign up to reply
  • 1
Related Resources Creative Real Estate Financing Forum
If You’re Well-Prepared, You Can Lower Your Loan Length
How to Raise Money for Your Next Deal—Without Legal Issues
Best Deal Ever Show #6: Using FHA to House Hack
5 Investment Property Finance Tips to Help You Get the Financing You Need
The Guide to Investing in Real Estate with Limited Resources
Resources Read, see, and learn more!
Link Real Estate Investment Calculators
Link BiggerPockets Blog
Link Path to Purchase
Link Mortgage Loans
Link Find a Contractor
Link Real Estate Agents
Link Hard Money Lenders
Link Real Estate Listings

Top Contributors

Andrew Postell
Andrew Postell
Fort Worth, TX
9.29
Score
Joe Villeneuve
Joe Villeneuve
Plymouth, MI
7.19
Score
Daniel Dietz
Daniel Dietz
Reedsburg, WI
6.46
Score
Kevin Romines
Kevin Romines
Winlock, WA
6.12
Score
Nathan G.
Nathan G.
Cody, WY
4.97
Score

Creative Real Estate Financing Forum Trending Discussions

  • obtaining loans based on income of the property
    11 Replies
  • How much money do I need to save?
    2 Replies
  • Personal & Business LOC
    29 Replies
  • 10 WAYS TO BUY AN INVESTMENT PROPERTY WITH NO MONEY DOWN
    125 Replies
  • Trying to Understand Owner Financing Terms Structure
    1 Replies
Close Thin

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here

Already have an account? Click here to log in

Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2019 BiggerPockets, LLC. All Rights Reserved.