Purchasing second property with HELOC from my first property

[Jeffrey Schechter]

My wife and I are looking to add a second property to our portfolio, we are looking to use the appreciated value of our first property to purchase the second.  

I am just looking for some help understanding how to calculate cashflow while needing to incorporate the HELOC's variable interest rate. I don't want to get myself in a situation where I am losing money each month. Please reach out if you have purchased a property with a HELOC or have helped investors in this situation.

Thanks

[John McKee]

Let's say you borrow 100K from your heloc and the current rate is 6%.  Your payment is 100K x 6% = $6,000 a year or $493.15 a month (30 days).  So now you know your payment!!!!

The advantage of the heloc is that you have quick access to funds, no bank fess, can pay it down anytime you want, there is no additional principal payments thus increasing your cash flow, and you get to write off that interest!

Even if your breaking even the Heloc buys you time to create value add if that is your strategy or come up with the capital to pay off the heloc and create the positive cash flow you're looking for in the first place.