Buying a rental, using Home Equity Loan and Financing
I apologize in advance if this has been discussed. I have discussed something in the past relating to this, but this was more specific to my current situation. I did a quick skim and didn't seem to find the answer I was looking for.
For years, I've been researching and reading about getting into real estate investing. I've bought all the books and listened to the podcasts and have yet to pull the trigger. I'm finally in the process of making a plan and a property recently came open near me for $103k that appears to fit the bill. Unfortunately, I can't use any money of my own to fund the downpayment. But we have enough equity in our home to cover a 20% downpayment. This still leaves me with the remaining $83k to fund through a conventional lending.
Bad idea? I don't want to be so eager that I force something to happen. Yet, I don't want to sit back and let opportunities pass me by.
Any suggestions, tips, ideas would be appreciated!
Chris
Happy New Year
Most Popular Reply
@Chris Webb If the numbers make sense and your profit from the rental exceeds you interest payment on HELOC why not? Few things to consider:
1. Is the property in the growing neighborhood (economy and population wise)? Maybe it makes sense to invest with current numbers but is it sustainable?
2. Make sure you credit score is solid. you are opening two new lines of credit at the same time, so you need some cushion.
3. Most of HELOC is variable interest rate. Make sure you build in cushion for interest rates going up in the future.
4. Who's managing the property? if you are not using a PM, also make sure you consider the time you have to put into managing the property. don't discount the value of your time!
One last tip, make sure you do a thorough inspection before you proceed :) Hope that makes sense.