HELOC for a down payment on investment property?

[Timothy Yen]

Hi BP community!

My mortgage banker suggests that apply for a HELOC on my private house and use those funds for a down payment on a rental property (2-4 units) my goal is cash flow of 10% and appreciation with the rehab/fixes I put into the property. I have $200-300k equity depending on appraisal & am looking in the Long Island area for now with the intention of expanding to other markets (Durham NC).

I'm also looking to switch my old 401k and ira's into a SDIRA, which should get me $150k. 

I want to get my finances in line so I can really start taking my analysis of properties seriously and make a move!

Any suggestions? Am I missing something? I feel that HML's as a newbie is not realistic since no one would want to lend to me.

Thanks so much!

Brgds, Tim

[Lana Lee]

Originally posted by @Chris Connery:

I just took a 60k home equity loan at 4.75% to help with a down payment on an 8 unit commercial property. Originally, I was going to just do a HELOC and pay interest only payments. Due to my current situations and plans for when I might eventually leave my primary residence I opted for the Home equity loan at a 15 year fixed rate. I made this decision right when the last rate hike happened, I believe more are coming (HELOC is not a fixed rate). I'm happy with this decision. Also, I did not use my current mortgagee for the home equity loan. I shopped around a bit and the approval process was ridiculously easy. I literally talked to the home equity lender twice.

You can for a fact find a lander who offers fixed HELOC for primary house. We just opened HELOC with 3.99% fixed rate. 3 years draw period, 10 years Amortization. $0 closing costs, no physical appraisal.