Is it a good idea to buy investment property on HELOC?

[Santosh Bobbili]

Hi,

I am a new real estate investor based in LA. I have recently closed a townhome in LA and producing some cash flow out of it.

Now I feel am ready for another investment, but I don't have enough cash to put 20% down on the next investment. Me and my wife both are on W2 with well paid jobs and we own a single family.

Is it wise to take HELOC loan on our home and use that as a down payment on the next investment property?

Appreciate any feedback.

Thanks,

Sai

[Trevor Fleck]

@Santosh Bobbili agree with others. A HELOC is a powerful investment tool, but you should really treat it as a short-term solution with an exit strategy. For example, I've used HELOCs to increase my purchasing power with cash and then refinancing into long-term loans. I've also used HELOCs in Cape Coral to fund the construction of build to rents using private funds and then refinance out on the back end. Bottom line, if you don't have a firm exit strategy to pay back your HELOC then you haven't found an appropriate investment to justify risking the roof over your head.