Use home as first investment or use HELOC to purchase?

[Laneetra Miller]

Hello everyone! I've been using bigger pockets for a while now and have just been trying to get as much info as possible. I finally feel like I am ready to purchase my first property but I kind of want some feedback first. A little back story: My husband and I were renting a house and after our year lease was up, the landlord decided to let go of the property. We decided to buy it and she was gracious enough to sign the warranty deed over to us. After purchasing the property, we decided to get a HELOC and the house appraised for 3x's what we paid for it. I should add that we live in Detroit and would like to buy another home for our growing family. I really want to add to our portfolio but I am unsure of what would be the best way to get started. My question is, should I use the HELOC to purchase more properties, should we rent out this home and buy another one, or should we just sell this house? Any advice would be greatly appreciated. Thanks in advance!

[David Lee Hall, III]

@Jimmy Lieu

There are many deciding factors on this: interest rate is one, number of origination points is another. Effectively I did both. I used the HELOC to buy the property free and clear. Then, after it was partially paid down, I refinanced my house at a lower rate and actually took out more money from my house due to pay down and appreciating about 50% over 4 years.

There are the questions of how much equity you have, how you plan on using it, is your home appreciating, etc. Perhaps I did not want to re-extend what I had on my personal mortgage at the time of the HELOC. There are a lot of factors that went into the decision in 2013. Not to mention, I didn't even know what BRRRR was at that point, so there was no factor of what was better given BRRRR vs. simple buy & hold.

Sorry this was a generic answer and not a blueprint. :-) You could do either IMO depending on your circumstances and what is available to you with lenders and your credit situation.