Seeking Advice on Financing Future Rental Property Projects

[Keith Angell]

Hello everyone,

I’m looking for some advice as I plan the next steps in my real estate investments. Here’s a bit of background on my current situation:

• I own one rental property that generates $1,900 per month in rental income, and it is paid off ($300K).
• My primary residence is also paid off ($288K).
• I’m currently building another rental property with cash ($200K). Rental should be $1,600 a month.

This year, I plan to build one more rental property, and it will require financing. It will be an identical home to the one I’m currently building, and I expect to need no more than $160K in financing.

I’m not looking to overextend myself by taking on too much debt, but I want to make sure I’m approaching this in the right way. 

My question: Is using a HELOC the best option, or should I consider refinancing my home for a 25-year term and putting all my rental income toward it? With my rentals generating around $46K net annually, I'm hesitant to take on a long-term loan just to keep payments lower, so I'm leaning towards a HELOC. Am I on the right track with this approach?

I’d really appreciate any insights or suggestions!

Thanks in advance!

[Daniel Tanasa]

Quote from @Keith Angell:

Hello everyone,

I’m looking for some advice as I plan the next steps in my real estate investments. Here’s a bit of background on my current situation:

• I own one rental property that generates $1,900 per month in rental income, and it is paid off ($300K).
• My primary residence is also paid off ($288K).
• I’m currently building another rental property with cash ($200K). Rental should be $1,600 a month.

This year, I plan to build one more rental property, and it will require financing. It will be an identical home to the one I’m currently building, and I expect to need no more than $160K in financing.

I’m not looking to overextend myself by taking on too much debt, but I want to make sure I’m approaching this in the right way. 

My question: Is using a HELOC the best option, or should I consider refinancing my home for a 25-year term and putting all my rental income toward it? With my rentals generating around $46K net annually, I'm hesitant to take on a long-term loan just to keep payments lower, so I'm leaning towards a HELOC. Am I on the right track with this approach?

I’d really appreciate any insights or suggestions!

Thanks in advance!

Congrats for your success. HELOC is usually a good option for something short term, you, don't really want to buy a long term rental property on a HELOC. Look at it more like a credit card. People like to use HELOCS especially now, if they have a very low interest rate first position mortgage, in order to tap into that equity without losing the low interest. In your case since your properties are paid off, I don' see any reason why you would use a higher interest HELOC instead of just doing a cash out refinance.