Using HELOC/HEL for some or all of purchase

[Matt Norris]

Currently in Nashville, TN, with a primary residence and a SFH rental with strong cash flow. Currently looking to add another rental property. We have flirted with the idea of section 8 tenants, but are leaning towards a more traditional long term rental plan. Being in Nashville, we are very open to looking in other up and coming markets. On our rental property we have about $100k-$120k in equity and we are planning on leveraging that for the next property. In some markets this could purchase a property outright and others we could cover 50%. We would like to be able to continue the pattern of leveraging equity and OPM in to the next property. Any advice on the pros and cons of using the HELOC/HEL and purchasing outright or only using for a large down payment?

[Matthew Kwan]

If you do cash out refinance it would allow to only get to 75% LTV around the high 7s with some points, they would still require to be 1st position. As for HELOC allows it be in 2nd position and it allows you to get up to 90% ltv for primary. However, rate would be prime + index + an additional +2% for the shock factor just to qualify, but you can draw the funds whenever you want vs cash out where you have to draw all the money after closing.

The question is what are you trying to use these funds? What's your main objective that you are trying to achieve?

@Carlos Valencia @Albert Bui