#AskBP 007: Should I Use a Home Equity Loan (or a Home Equity Line of Credit) to Invest in Real Estate?


In this episode of the #AskBP Podcast, Brandon Turner explains how to tap into your home equity to purchase investment properties. You’ll learn the difference between a loan and a line of credit, as well as when (and if) to use each on specific real estate deals. Additionally, Brandon covers the negative aspects of using your home equity, and ends with a story of how his in-laws used their equity to buy an incredible duplex.

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About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.


  1. Joe Howell

    Great advice Brandon! This is exactly how I got my start in REI as well. We took out a HELOC on our house for a down payment on a Duplex and 1 year later, the HELOC was paid off. We then re-financed (if you will) the HELOC since the value of our house increased over that year and increased the HELOC limit. We then used some of the HELOC to put a down payment on a 4plex which we acquired through owner financing (Land Contract, I believe is the legal term). It was a rough 1st year for the 4plex, so I had to use the HELOC to pay for the numerous deferred maintenance issues, as well as paying the mortgage during a high vacancy period. I have since requested an additional Business Line of Credit, using the equity in the duplex and 4plex as collateral. You mentioned this was difficult to do, but I would disagree, if you have the properties in an LLC and a local credit union or smaller banks. They seem to be willing to do this around here. I will be closing on that the week and am currently on the hunt for another multi-family property. I want to get this train rolling faster than what I have in my business plan.

  2. sandy salazar

    if i wanted to use a line of credit for a down payment for an investment property (20% down), do I need to pull out the money and leave it in my account to season it to be able to get financing? i don’t want to pull out the money and be paying it for six months while its being seasoned so I can purchase an investment property. Any feedback is greatly appreciated.

    • Cliff Shaw

      I literally closed on my HELOC days before I used it for the down payment on an investment property. The mortgage company just needed to know up front where the down payment was coming from and then needed a copy of the signed HELOC docs. They day my HELOC funded I called my Credit Union and had them send me a cashier check made out to the Title Company for closing on the investment property.

  3. Darrin Wesenberg

    Speaking of HELOCs, I’d like to ask the BP community for some advice here. In a nutshell, my question will be how can I take out a HELOC on an investment property? I currently own a single family rental worth about $85,000 in which I still owe $35,000 (i.e. $50,000 equity or about 60%). The cash flow is great ($825 monthly rent vs $300 monthly PITI, or $525 monthly profit). I’d like to take about $30,000 equity out to pay off all my credit cards and student loans and use some as a down payment on my next property. My only source of income is from 3 good-flowing rental properties (including this one), and I don’t have any W-2’s, my tax returns won’t show enough income, etc etc. Despite this and my $25,000 credit card debt, my credit score is still excellent, in the 750 range. Would I even be able to take out a HELOC on this rental property, and if so what’s the best advice to do that? Should I just talk to some small local banks? My dilemma is do I just sell the property to pay off my other debts? If I can get a HELOC, I would prefer to keep the house!

    • sandy salazar

      Hi Darrin,
      This is from what I know, you can usually go to the bank where you have your first mortgage on the property to take a HELOC loan. If you are currently residing in the property you want to take a HELOC loan they will give you up to 90% (depending on the lender), if its non-owner occupied you will be able to get 70-75% LTV. so if your property is worth $85,000 and you owe $35,000, you have $50,000 in equity, when you do the HELOC if its owner occupied you can get up to $45,000 if its non-owner occupied you might get $35,000. If you sell the property you might be able to pay off your debt, but you will have to pay capital gains tax, and don’t forget the brokers fees to sell your property. If you sell the property you will also be losing residual monthly income you were getting. It all depends on what you want to accomplish. You can contact local brokers and see if you were to sell the property how much will you be left with after the fees associated with the sale, and contact your local banks and see what the interest rate is on a heloc. Sometimes student loans have lower interest rates than heloc, and if thats the case why would you use a higher interest rate heloc to pay off lower interest rate student loan. As for the credit cards, you said you have a good credit score, see if you can qualify for a credit card that can give you balance transfers, some credit cards offer 0% interest for up to 18 months. Some things to think about. I hope that helps.

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