Anyone with experience HELOC's?

Question

Hello and good day to anyone reading this. My name is Timothy J. Wagner and I have a question that I'm hoping someone can help out with.

I'm new to real estate and am hoping to get on my own feet someday but at the moment I am helping my dad grow his own personal real estate business. He had applied for a HELOC but is worried about it being a variable rate interest. because of this, he is hesitant to go through with using the HELOC due to where the market could be going.

I'm curious if anyone has recently used a variable rate interest HELOC or is currently using one or a similar type loan, and what your experience has been like.

if you think we should go through with this HELOC I would like to know your reasoning, likewise if you are against us going through with this HELOC then please let me know as well.

Thank you for reading. This any help goes a long way, and I hope the best for all of you.

Denis Ponder · Answer

I currently have a HELOC on a property and used that money to renovate the same property.  I plan to rent that property out and pay the HELOC back with the cash flow.  I also plan to use the HELOC as down payment money for future investment properties, pay it down, rinse, and repeat.

Skyler Carpenter · Answer

Good afternoon,

I used a variable interest rate to purchase my first rental property last fall and will continue to use it. HELOC's can be beneficial as they can be interest only payments which provides some flexibility as well as the interest structure is based on the outstanding principal rather than a front loaded amortization schedule. I would not hesitate to use one, just be sure you calculate the payment in when figuring your numbers on a property. They can also simply provide some security as a "back up" cash reserve if needed.

Best of luck to you.

Kerry Baird · Answer

If he can get a fixed rate 2nd mortgage, that will accomplish a similar thing, but not adjust.  I like the ability to draw and repay with a HELOC, but they also can rise precipitously, or can be called due.  I sure liked them a whole bunch better when rates were going more in a sideways direction, but the Fed has been stating that they will be aggressive in fighting inflation, so rates may continue to go up.

This is a season to look for motivated sellers and look for deals as prices look to be reducing, days on market are increasing, and foreclosures are ramping up.

Anyone with experience HELOC's?

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