cons of using HELOC to buy investment property

[David O.]

I am thinking about taking out a HELOC (~$1M) to buy rental properties. I do not have any rental properties in mind yet and am planning to apply for a HELOC, after approval I will then look for suitable properties to buy. After I purchase the rental property, I plan to cash out refinance - I heard that if I do a cash out mortgage within 30 days I will qualify for the same lower rates as a purchase loan. The reason to use HELOC to buy the property instead of using a purchase loan is because I think it will take a long time to close (my last purchase in June of this year took 60 days to close). Also, cash offer using HELOC will be more attractive to sellers.

I have never done this before. Is there any potential problem with this method? Specifically, will a HELOC negatively affect my mortgage application for the cash out refinance of the newly purchased rental property? I know that lenders consider debt to income ratio, but am not sure if a large HELOC will be considered by the lender negatively.

If this is not the best approach, any recommendations? Thanks!