Should I HELOC my primary or search for HML for my first investment

Question

Hey Guys,

I am a rookie investor and exploring the options on what would set us up for success. We currently have put alot of sweat equity into our place and we are wanting to convert our primary home into a Long Term rental. My question is should i take a heloc out on our propety to get started with our next investment or would you look for hard money loans or partners? My plan is for me and my wife to rent another home for a year and use this money to purchase a STR

Melissa Justice · Answer

@Weston Rutkowski,

Great question and you’re in an exciting position with multiple solid options on the table!Since you’ve already added sweat equity and are looking to convert your current home into a long-term rental, using that built-in equity is a smart way to scale without selling. Here are a few thoughts based on your goals:HELOCPros:* Flexible funding you can draw from as needed* Interest-only payments during draw period* Typically lower rates than hard money* You retain full control (no partner splits)Considerations:* It adds debt secured by your primary residence* Rates are variable and can rise* Make sure the rental income will comfortably cover your existing mortgage + HELOC paymentsIf your credit is solid and you have enough equity, this is usually the least risky, most cost-effective option for a new STR.Hard Money LoanPros:* Fast access to capital* Can help you compete with cash offers* Often used for flips or BRRRsConsiderations:* High interest rates and fees* Short-term repayment (usually 6–12 months)* You’ll need a clear and quick exit planThis can work, but it’s higher risk.PartnershipsPros:* Share risk and capital* Bring in someone with skills or market access you lack* Can accelerate your growthConsiderations:* Requires legal structure and strong communication* Profit splits reduce your long-term returns* Can be messy without clear roles and alignmentPartnerships can be powerful if you find the right person. But early on, many prefer to stay solo and build equity themselves.STR Strategy Tips:If you're using your HELOC for a short-term rental, make sure to:*Research STR regulations in the market you’re targeting* Build in costs for furnishing, management, cleaning, and vacancy* Factor in seasonality and create a realistic cash flow modelIf your home has strong equity and cash flow potential, a HELOC is likely your best next move to get that first STR under your belt with control and lower cost. Then, once that’s cash-flowing, you can rinse and repeat-possibly even without taking on partners or hard money.Let me know if you want help analyzing the HELOC route or STR market options. Happy to walk you through the numbers!

Best of luck,

Melissa

Lauren Robins · Answer

Hi Weston!

As a rookie investor, transitioning your primary residence into a long-term rental can be a smart move, especially if you’ve already added value through sweat equity. When it comes to financing your next investment—ideally a short-term rental (STR)—using a HELOC on your current property can be a solid strategy. HELOCs typically offer lower interest rates than hard money loans and give you flexibility, allowing you to tap into your built-up equity without selling the property. However, this approach does carry personal risk since your home is the collateral. In contrast, hard money loans are quicker to access and based more on the deal than your financials, but they’re expensive and best used for short-term flips rather than long-term holds. Partnering is another viable option if you’re looking to reduce personal financial exposure, though it means splitting control and profits. Since your plan includes renting a home yourselves for a year, using a HELOC gives you time to learn the STR business with less pressure, especially if you’re buying in a market with good cash-flow potential. If your income is stable and you’re confident in your STR market, starting with the HELOC gives you control, leverage, and breathing room to scale thoughtfully.Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

David Ojo · Answer

Hi @Weston Rutkowski, have you considered using hard money and business credit, that's what I use for my BRRRR projects.