Financing Advice /Tips

[Nadya Babanskaya]

Hi everyone! Newbie here looking to jump in and buy my first rental property very soon. I keep going back and forth on financing it, here are the 2 options I’m looking at and would love if anyone could help me walk through the math and see what’s the better or more logical choice:

1. Get a regular conventional loan and put 20% (25-30%?) down. Not trying to buy a complete fixer upper so hopefully no issues qualifying. I understand that my offer would look less attractive than a cash offer.

2. Get a HELOC (saw an intro rate of 3.99% for first 6 months locally), buy with cash, immediately apply for delayed financing, get 70-80% of the purchase price back to pay down HELOC and pay the remaining 20-30% with my money (and perhaps (hopefully) some cash flow if rented right away) within those 6 months during the low rate period. This way my offer is more attractive as I'm buying with cash but I'm still only using the same 20-30% of my own money in the end (plus delayed financing closing costs, not sure how much those are).

What do you think is a better option, am I missing something or are there better options I’m not considering? Would love any input, tips or advice from more experienced investors.

Thank you!

[Jay S.]

#2 is risky. HELOC rates these days are very fluctuating. I have seen many clients getting burned because of it since last year. And then you are trying to do cash out refinance which also has not favorable rates and terms compared to just purchasing. What if price comes lower when you refinance?

So, Go with #1. Instead of 30% down, you can perhaps do may be 10-15% down? There are lending options around there. DM me if you need help.