HELOC for down payment?

[Jon Hilfiger]

Has anyone used a HELOC on their primary residence to finance their first biggish deal? I found a decent deal that works with a 20-25% down but when I factor in paying back even the minimum on the HELOC (1% of outstanding balance) the numbers go south quickly. Key numbers:

42 units, $1.6M sale price; EGI - $234K; Expenses - $122K

There's room to reduce expenses, do some value add and tick up the rents overtime...So, thoughts? And...is this too big a swing for my first commercial deal? Thanks for any thoughts.

[Marcus Auerbach]

Are you running your numbers as is or proforma? The cost of your HELOCs probably around 4% - if you can't make 4% on your own cash it's obviously not a good deal. On a deal like this the only question is how much upside do you have? Cashflow is just what keeps the lights on, while you get there.

Cost per unit seems very cheap to me, which makes me question the neighborhood and the tenants. A cheap deal ("but the numbers are good!") usually comes with more risk than a not so great one - where you pay more per unit, you may have greater upside and lower risk.