Seeking Advice on Financing Rental Property Purchase with HELOC and Traditional Loan

[Han Jaewon]

Hello BiggerPockets Community,

I've been looking for the investment rental properties on platforms like New Western, Zillow, and Redfin. I've noticed some appealing deals on New Western, but they require purchases to be made in cash or via hard money loans. As I'm trying to approach this with a solid strategy, here's where I stand and what I'm contemplating:

1. Home Equity Line of Credit (HELOC): 

My spouse and I own our primary residence outright (no mortgage) and have spoken to a banker at PNC. We were informed that we might be eligible for a HELOC up to $480k with a minimum interest rate of 9.31%. The plan allows switching between fixed and variable rates for a fee of $100. However, I'm wondering if this is a competitive deal in the current market, and would love to hear your opinions and experiences.

2. Investment Strategy - Using HELOC for Immediate Purchase:

I'm considering using the HELOC to purchase a property, especially those available through wholesalers like New Western, which require immediate cash payment.

My strategy includes refinancing the property later with a traditional loan to secure a lower interest rate and more stable long-term financing. Is this a feasible and commonly practiced strategy? Any pitfalls or success stories would be greatly appreciated.

3. Investment Strategy - Using Traditional Loan:

For properties listed on Zillow, Redfin, and similar platforms, I'm leaning towards securing a traditional mortgage loan, assuming these purchases don't demand the same immediacy as the off-market deals.

4. Tax Implications:

If I use a HELOC for purchasing a rental investment property, is the interest eligible for tax deduction?

I am eager to learn from your experiences and insights. If you have suggestions, alternative strategies, or any advice on navigating these options effectively, please share. Your guidance will be invaluable to me as I embark on this real estate investment journey.

Thank you for your time and help!