Leveraging a HELOC

[Varinder Kumar]

I am thinking about getting a HELOC on my current SFR in Orange County, CA to purchase multifamily properties. I currently have a clean 500 cash flow on it, I manage the property myself. Im looking to pull out enough to put a 20% down on the multifamily. From what I see my current cash flow will take care of the payments on the HELOC and ill be able to purchase my multifamily as well. I dont have any other source of funding other than this.

What are your guys thoughts on this? Good move on investing and moving up? thanks!

[Micki M.]

I like using HELOCs since you're essentially recycling money that's tied up in the house doing nothing otherwise.  And since you can pay it down then pull cash out again you can manage your interest costs and still have a safety net (versus paying down a regular mortgage).

With any debt / financial decisions just consider your worst case scenarios (vacancy, emergency repairs, etc) and make sure you've got reserves.