HELOC for 2nd home? investment/retirement

[Ryan Burke]

Good day everyone,

Here is my situation. I am approved for 100K HELOC . 12 months at 3.99 APR then it goes to a variable 5.49 after that.

I have a peice of lake front land(paid for) here in Alaska about 25 mins from my primary residence. Over the last couple of years I have completed the clearing and grading of the property, it is ready for construction. The location is in walking distance to a very nice hike and is close to many other outdoor attractions. I want to use this property as a weekend/ holiday getaway but think i will try to Air BNB it out to cover some of the expenses. If I had it my way I would rent it out full time and have instant passive income. However my wife wants to be able to enjoy it as well.

It will be a small cabin(stick frame) construction with a half loft upstairs. I would like to live in that cabin full time in retirement....roughly 15-20 years from now.

So some questions that I have are these

Would you do it?

I will not be planning for the rent to cover all expenses and I understand that I will be paying out of pocket for a place i dont live in full time but it would be another asset that will not have a mortgage on. I can swing it however this means less "do what I want when I want" and I will have the HELOC debt. The plus side is that the projected value of the property will be close to 250K once completed. It will at that time have around 175K into it. 8 days of renting the cabin out will cover all expenses a month, it is dooable especially in the summer. Not in the winter.

It leaves me options to: 
1. Rent out full time (my fav)best ROI, but no personal enjoyment (mad wife)

2.  Air BNB it/ try for 8 days a month ideally

3.  sell it (also mad wife)

4.  Don't build at all and continue to pay down primary home with goal of being 100% debt free in 6-7 years. 

5. something else...

Thanks for looking over this I apprieate all of your advice and really enjoy this forum.

-Ryan

[Bob B.]

I think the HELOC is a bad choice for long term debt. Maybe using the HELOC to get it built and then get a2 0-30 year fixed rate mtg. unless the HELOC will give you a decent locking rate. Why not AirBnB and see how it goes and if it doesn't you can always rent it long term. You could use the income to fund short term vacations. If your home will be paid for in 6-7 years then you will have more flexibility. Little cabins are great, but they tend to get really small when you live in them full time. It will be cheaper to build it a little bigger now than later.