Use HELOC to scoop up properties?

Question

Coronavirus closed my business and I can't really spend what money I have in my bank account at the moment. However, I own all my rentals in cash and my buddy recommended I open a HELOC on the units so I can get the bank to write a check when a good opportunity comes around so I can scoop up some extra properties - then 6 months later refinance and pay back the HELOC.

Wondering if anyone has any insight into this strategy and what kind of risk I'm opening myself up to especially moving into the months ahead.

Thanks

Wondering if anyone has any insight into this strategy and what kind of risk I'm opening myself up to especially moving into the months ahead.

Thanks

Alex Olson · Answer

Account Closed I think it is a good strategy...if you buy right (like anything). I would make sure you get a great deal on your heloc and shop rates. You may have to do a portfolio loan refinance vs a line of credit. You will want to make sure that you get it all under 1 bank. Depending on your risk tolerance you can leverage 80% as debt on multifamily purchases. A safer bet is 75% as debt. But, if you are wanting to pay back the heloc that fast you may want to speak to your banker about your strategy. They want you to be ultra successful so you keep coming back for more.