Linden, NJ · Member since 2019 · 22 posts · 12 votes
I currently own a 2 family home and I'm House hacking and plan to get a single family home and hopefully grow old in. My broker suggested since my 2 family will be passive Income do HELOC for the single family home any one done this or think its wise to do
I currently own a 2 family home and I'm House hacking and plan to get a single family home and hopefully grow old in. My broker suggested since my 2 family will be passive Income do HELOC for the single family home any one done this or think its wise to do
There are many factors, but the advice I've been given about utilizing HELOCs is to utilize them for temporary investments that can yield great returns. If you can't pay it off in 6 months to a year, then it's likely not worth being overleveraged. If, for whatever reason, real estate values fall significantly it's possible banks call their notes due and you could be on the hook to pay it. I'm not saying that will happen, or to try to scare you into not using it, but that's honestly the risk of using it as a Down Payment on a 2nd place. Overleveraging is what got Dave Ramsey into bankruptcy. you'd prefer to use HELOCs to leverage temporarily and strategically, not necessarily for non-income-producing long-term holds. A case could be made to use one for a moderate-term live-in-flip I suppose! If you could, for example, cash flow enough off your other property such that the mortgage on the new one was reduced almost completely or completely, I could totally see that making sense so long as you had a nest egg of cash to take care of the HELOC in the worst case.