Is the HELOC a smart move with an upcoming recession ?

[Ben Cochran]

Trying to find the best way to utilize the assets I have, to purchase another home. Quick rundown of my position.

I own 2 homes. One is a rental, appraised for $350k, has no mortgage and brings in $1600/month.

The second is my primary residence which my wife and I are living in and flipping/renovating.

It will be 24 months this December (capital gains). Paid $330,000 and now appraised for $580,000.

We'd like to do two things. Complete the renovation on our primary, sell it and buy our "forever" home. Not sure where to pull the funds from with a possible recession looming. Get a HELOC from the zero mortgage rental or from our primary that we plan on selling? Just looking for the best strategy. Thanks

[JD Martin]

I would never take money out of an asset to use for personal consumption unless I was at the point where my assets produced enough income to support me and support continued growth of the business (or continued growth of business reserves). The house you live in is primarily a place to live, so financially speaking unless you planned to sell the "forever" home later (which then makes it not a forever home), it would be a foolish move. 

How much more expensive is your "forever" home than the one you live in now? 

The rental that's worth $350k but only brings in $1600 per month doesn't sound like a great rental, to be honest. Unless it was in a really high growth area, I would probably sell that property, use the proceeds to 1031 into a couple of better ROI properties, then maybe if there was enough left over use some of those proceeds as gravy for the forever home.

On a side note, I'm genuinely puzzled about the "forever" home thing. Maybe I'm just getting too long in the tooth but I never remember in my age group talking about forever homes when we were in our 20s and 30s. You look like a young guy from your picture - what makes you think that your next home is your forever home? I'm not being critical, I'm really trying to understand this concept. I'm in my 50s and forever homes were for people that had reached the end of their working career in their 50's or 60s, reaping a lifetime of hard work since they didn't need to conserve those funds for that many more years to support them.