Making down payment-- cash v. HELOC

[Doug Marsh]

Hi all,

Last year we bought a vacation home near our primary residence in the Denver area. We've been doing short-term rentals with that home, more with the mindset that renting was a means to owning a vacation home than to generate income. But that venture has exceeded expectations, and now we are looking to start picking up properties specifically for the purpose of investing.

Our first question is how to approach the down payment. We could probably save up enough for a 20% down payment, especially on some less expensive properties, within the next year or so. But we also have a HELOC that is totally unused, which we could tap for up to $150k. As much as I don't want to lose more time waiting out the market (losing rent payment and appreciation in the process), using the HELOC will mean we are effectively borrowing for the entire purchase price, increasing interest payments and making it that much harder to stay cash flow positive.

What say you-- wait to build up down reserves for a down payment, or use the HELOC?