To Heloc or Not to Heloc

[Anthony Le]

Hi All, new to real estate and could use some advice. Would you HELOC in this situation?

I have a rental property in Las Vegas that is currently valued at $550K, I have about $220k in equity on the house and it's currently generating a decent cashflow of $800 a month - 3.25% Interest rate. 

I live in California though and am renting every year for about $3000 a month. If prices drop in my area, I'd love to buy but am short on cash. I'm wondering if it would be smart to take a 40k-50K HELOC in order to purchase a condo. The plan will be to live in this condo 3-4 years, rent it out or sell after. I can use my cash flow of my first rental property to pay the monthly HELOC payments.

Thoughts on if this would be a bad idea given the variability in interest rate of HELOC and the length of my loan.

Appreciate you all!

[Lorenzo Prieto]

Hey Anthony welcome to BP! If I understand right you are thinking of doing a HELOC on your rental property. Lenders who do HELOC's on rental properties are a little harder to find but don't stop searching, I know there are investment friendly lenders who do HELOC's on rentals.- I just don't know any personally. Overall, I think it's a good idea. I've helped a lot of people do this exact same thing only difference is they do a HELOC on their primary residence.

Once you find a lender who will lend on your rental property I'd recommend getting a good understanding of how their HELOC products work. - Variable interest rate, what's the cap rate, how much can it increase and how often, pre-payment penalties, etc etc.

Good luck and feel free to reach out with any questions.