Thoughts on using HELOC/HOME-EQUITY LOAN for purchase of new Primary Residence?

[Mayur Chaudhari]

Hi All, 

I am renter in Charlotte and have a ton of equity in our first home in Hawaii (now a rental). Looking to do a BRRRR on a new primary residence in Charlotte but wanted to seek advice on whether I should use HELOC/HOME-EQUITY LOAN against our Hawaii house to pay for down payment and renovation costs. Not sure about drawbacks of doing this... anyone have any advice or experience in the matter?

Trying to get our real-estate portfolio growing and tired of renting!

[Caitlin Davis]

Hi Mayur. Plenty of investors start this way, and it's a great idea IF the numbers work. This is not something you would want to "hope for the best" with. You’re pledging your primary residence as collateral, which increases your overall risk. 

When underwriting potential deals, it's crucial to include all interest costs from the HELOC in your expense calculations. Run projections for different rate scenarios to ensure you'll still have positive cash flow even with rising rates. That way, your final purchase price and ROI estimates accurately reflect the true cost of using a HELOC.