Using a Heloc- Pros and Cons

[Erin Whalen]

I am looking to buy my first rental property (SFR). I have a substantial amount of equity in my primary residence, which would allow me to get a HELOC and thus, cash, to start investing. Are there any cons to this route other than losing my house if things go south? Or even pros I might not be considering?

I would like to use cash initially for purchase and then take out a conventional mortgage once the property is fixed up so I can keep my residence and investments separate.  Does this help lower the risk?  I am concerned about qualifying for another mortgage since my regular job is not high paying.  I do have a good sized emergency fund that should carry me through most issues and vacancies, but I would be mostly relying on rent payments to pay off the mortgage.  What do banks look at to determine how much they will loan to you?  Is it different on an investment property than a personal residence?

Thanks for your help!