Buying investment property through Heloc or conversational loan?

[Vikas Panwar]

Hello everyone,

Have built line of credit on my primary house. Though I haven’t open any Heloc account yet but I will.  I am planning to buy a rental property upto 200k.

have two options

1- Borrow 75% amount through Heloc and rest from saving account.

2- Finance the property with higher internet rate ( still less than current Heloc rate )  and rest 25% down payment from saving.

(We still have some funds reserve for emergency)

Here is my opinion:

Pros with 1st option: 

Open Heloc and buy house, save the closing cost and refinance the 2nd mortgage when interest goes down in the future.

However the cons is,  in the couple of month if I have to buy another property , I have to pay off my Heloc first in order to buy another property from Heloc. I won’t be able use conventional loan. Also don’t think I would have enough equity built on the the rental property.  

also if I want to do any upgrade before renting, I would not have enough fund for upgrade.

let’s go with 2nd option.

cons first.

Though I am paying closing cost upfront. But if I have to refinance in the future I have to pay closing cost again only appraisal fee if I stick with same lender.. So for refinancing I am paying appraisal. 

But ultimately I am paying closing cost two times. .

Pros:  

if I have to invest in another rental property, I can still use my home equity line of credit to buy another rental property as quick as possible. 
also by conventional loan, I can draw some fund from home equity for any upgrade on the rental property.

thought ?

Thanks