Strategies to use Home Equity to buy an investment property

6 Replies


Newbee here. I bought my primary home last July. Between then and now, the home value has appreciated by about $300K. I am looking to use this $300K equity to buy another rental property.

From my limited knowledge, I have heard about getting a HELOC for $300K, use it as downpayment for a rental property. Is this the best way to go ?

Background Info : Primary residence bought for $2.4M. Loan Amount Outstanding $1.8M. Made $60K worth of improvements. Zillow currently estimates its value at $2.73M. have great Credit History

Thanks in advance for your suggestions.

@Dilip Rangan that is one way to do it. If you aren't planning to sell the home then there are a few things you can do:

  • HELOC - On demand money. Until you use it, it doesn't cost you. Very useful because it is there and waiting. Drawback is that the interest rate is not fixed and can go up
  • Cash Out Refi - This refinances the current loan and gives you cash out. Very useful if interest rates have dropped since your original loan, or if you need to get rid of PMI from an FHA loan. Your payments go up, so even if you do not have a deal ready for your money you are paying for it
  • 2nd Mortgage - I have never used this strategy, so I am not the guy that can give you much more information than that it exists

Good luck, it's not a bad dilemma to have :)

@Dilip Rangan HELOC is good option if you have short term goal for this loan. If you want to rent the investment property you need fix loan.

@Dilip Rangan As other have mentioned, you might be able to go the HELOC route but it is not advisable if the money is going to be tied up in the investment. You are much better off doing a cash-out refi into another 30 yr fixed and then using the cash for investment down payment.

You should get real comps from a local realtor. 60k in improvements does not equal 60k increased value. And forget what Zillow says. Get real comps.

Never go by Zillow!

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