Is it foolish to use a HELOC for a down payment on a rental property?

[Jacob Anderson]

Hello, I'm looking for some advice. I found a property in my area that would produce decent cash flow and appreciation; however, I would have to use funds from a HELOC on a different rental property for the down payment. This would obviously reduce my cash flow on both properties, as I would be paying the minimum HELOC payment plus extra towards the principal to pay it off quickly. This would also prevent me from using the HELOC for a different type of investment like BRRRR or fix and flip. It would take around 5 years to pay off the HELOC by using some of the monthly rental income from two investment properties. Is it foolish to consider using the HELOC for the down payment? Any advice or shared experience would be great. As a side note, my wife and I work full time and are looking at strategies that are less time intensive. Thank you!

[Chris Seveney]

Quote from @Jacob Anderson:

Hello, I'm looking for some advice. I found a property in my area that would produce decent cash flow and appreciation; however, I would have to use funds from a HELOC on a different rental property for the down payment. This would obviously reduce my cash flow on both properties, as I would be paying the minimum HELOC payment plus extra towards the principal to pay it off quickly. This would also prevent me from using the HELOC for a different type of investment like BRRRR or fix and flip. It would take around 5 years to pay off the HELOC by using some of the monthly rental income from two investment properties. Is it foolish to consider using the HELOC for the down payment? Any advice or shared experience would be great. As a side note, my wife and I work full time and are looking at strategies that are less time intensive. Thank you!

 Surprising you can get a heloc on an investment property - those are tough. I would only do it if it was an absolute no brainer of a deal as if it goes south then you not only hurt yourself on that deal but also the property that you took the heloc out of.

This also depends as if your current LTV is 30% and want to go to 50% is different than going from 50% to 80%.