A real newbie here. This question is probably asked a lot.
My offer just got accepted on an investment property. Sale price is $200K and I plan on making 25% down payment. Would you use cash or HELOC from primary home for the down payment? The current tenant is paying $1450 rent and we are keeping the family. This will be a long term investment. The house is in good condition.
Hi @Aysel P., it really doesn't matter either way. If you like to get nerdy with analytics then you'll likely find that you are more optimized with the HELOC versus cash, but that's really not super important at this stage. Both methods of purchase constitute "paying cash" to the seller and to you both maintain similar liquidity.
Hi @Aysel P., it really doesn't matter either way. If you like to get nerdy with analytics then you'll likely find that you are more optimized with the HELOC versus cash, but that's really not super important at this stage. Both methods of purchase constitute "paying cash" to the seller and to you both maintain similar liquidity.
This will come down to preference and what you are wanting/willing to do.
If you use a HELOC on your primary then the HELOC payments will be used with the Debt-to-Income for the new investment. If you can handle the DTI hit and the payments on the HELOC then this is a great option as it keeps you with cash in hand and the HELOC can be used as a tax write off. However, if you can't handle the new HELOC payment combined with the new investment payment then cash is king.
On another note having the HELOC is a great investment in itself because you can draw on a standard HELOC for 10 years which will allow you to put a down payment on this investment and if you pay it back you can use it again on your next investment or to even to update the investment or the primary.