How should a HELOC to buy an out-of-state rental?

[Diane Caballa]

Hi all,

I'm pre-approved for a 122k HELOC for a 30 year fixed rate at 8.5%. Should I take this out to buy an investment property, functioning like an "all cash" purchase or should I use it as a down payment for a more expensive property and take out a mortgage? Which lenders would allow a down payment from a HELOC source?

Looking forward to learning from all of you!

[Larry Turowski]

@Diane Caballa you'll generally be able to get a better deal when you offer all cash but you'll also likely be doing some rehab. The idea is to buy (for cash), rehab, rent, and then refinance, and repeat (BRRR or BRRRR). The refi part is where you ideally get back all your starting funds because you've improved the value so much, or most of your funds so that you can build back up to 112k quickly.

But rehabbing is not for the feint of heart, especially remotely, so consider your goals and ability to execute.