Looking for Advice on Scaling My Rental Properties – HELOC vs. Saving for Down Paymen

[Elliot Zander]

Hello all,

I'm currently at a crossroads and would love some advice on my next move in scaling my rental property portfolio. My long-term goal is to own 20 units, and I’m trying to figure out the best strategy to keep growing.

Current Situation

I've been using my primary residence’s HELOC to finance and renovate my rental properties. I now have forced equity in both rentals, but I’m unsure of the best way to move forward. Here’s a breakdown of my numbers:

Primary Residence:

• Estimated Value: $340,000
• Remaining Mortgage: $187,000
• HELOC Balance: $76,000 (fully utilized)
• Remaining Equity: $77,000

Rental Property #1:

• Estimated Value: $110,800
• Remaining Mortgage: $60,000
• Equity: $50,800
• Cash Flow: $375/month

Rental Property #2:

• Estimated Value: $215,000
• Remaining Mortgage: $115,000
• Equity: $100,000
• Cash Flow: $350/month

Other Income:

• $1,500/month

My Dilemma

I'm considering taking out a Home Equity Loan (HEL) on my primary residence to:

1. Pay off the HELOC (eliminating the variable rate risk).
2. Use the remaining cash for a down payment on another rental property (~$150K purchase price with 20% down).
   • Estimated cash flow: ~$150/month in year one.

Alternatively, I could save up for the down payment instead of leveraging more debt. My biggest concern is waiting too long and seeing prices rise even further, making it harder to buy later. But I also recognize that the economy is uncertain, and taking on more leverage could be risky.

Questions for the Community:

1. Would you take out a Home Equity Loan to pay off the HELOC and invest in another property now?
2. Or would you save up cash and wait for a down payment, even if it means delaying the next purchase?
3. Any alternative strategies you’d recommend?

I’d really appreciate any insights—thank you!