Beginner financing with a HELOC

[Ethan Adams]

I’m just getting started, looking for multi family rentals to buy and hold. House hacking is not an option but I can get a nice 30 year fixed at roughly 4% through my credit union with a 25% down payment.

In order to handle the DP, my plan was to open a HELOC on my residence and use that. My credit union also offers this and has a promo where if I take $20,000 as a disbursement immediately, they cover closing costs.

My question is this - I don’t have a property yet to purchase and it could be a few weeks or months to find the right one. Is it smart to take the $20,000 and start paying interest on it for that amount of time?

The CC would be a few hundred dollars according to the bank.

Thanks!

[Dave E.]

@Ethan Adams

Generally I would say it is not great to finance the down payment through a HELOC. You are basically financing 100% of the deal which increases your risk, and makes it harder for the numbers to work overall.

For me it would be a no, unless I had the perfect property lined up and knew all the numbers really worked.

You also need a plan to get your money back out of the property to pay your HELOC.