Proper timing of obtaining a HELOC vs target property loan

[Ilya Kazakov]

I'm gearing up for purchasing of my first rental property. I plan to use a HELOC on my primary home to pay for the down payment, closing costs, etc. on the property. I'm in discussions with several lenders and I have a few sites that offer decent HELOC options. Clearly, I will need to have HELOC funds before I close on a property loan, but I am still in the search phase for that property. Timelines of applying and closing on a HELOC vs a conventional loan vs a DSCR loan differ significantly. Are there rules of thumb or best practices in terms of how to navigate these independent application processes? Should one be done before others or should I fire off everything and hope the timing will work out? Any advise is appreciated.

[Andrew Postell]

@Ilya Kazakov I want to make sure to answer your question and not whether you "should" or "should not" do this strategy. Normally, when you open a HELOC, you don't have to draw from it immediately. Meaning, you can have a HELOC now, have $0 balance on it, and not pay any interest. You can leave it there for years before drawing from it. So, if you take years to find a property, then no big deal. Therefore, there won't be any risk to timing since you can't open one right now and not have any fees for doing it. I'm a little concerned that the "discussions" you have had with these lenders didn't mention this. That's a pretty basic benefit to most HELOCs. Please be careful out there.