tapping into equity

[Sosina M.]

Is it wise to tap into the equity of my primary home (investment property) for a down payment of a new multifamily/rental property?

[Benjamin Aaker]

I have done this multiple times in the past. I get a home equity line of credit and have it sitting, ready for the purchase. The new purchase needs to cash flow plus the amount of principal and interest in the HELOC. In other words, the new property needs to pay for itself and the HELOC. This can be repeated multiple times when equity is built.

Now to your question of whether it is 'wise' - If the second property cash flows, then it's possible. You are wise to ask the question though. If the new property fails for some reason, your plan will have to be to sell it and pay back the HELOC. Nonpayment of your HELOC could result in loss of your primary residence, so I understand the concern. Make sure you have backup plans and you'll set yourself up for success.