HELOC For Down Payment

[Account Closed]

I have a 31k HELOC @ 4.75% on a rental. No cost to me. Cash-Out-Refi is 7k closing cost for only 17k. Don't want to bother.

My plan is to use the HELOC as 20% down for a Conventional Investor Loan to acquire my 3rd rental. I would cover the 6-8k closing cost on the Investor Loan. They would factor in all rental income which was both rented recently in past two months.

My day job is 50k/year. My two rentals are cash flow positive. One at $569/month, the other $700/month. Both figures after expenses, but before budgeting for repairs/vacancies. I save it all in their respective accounts for now and don't blow them away.

Only other loan besides the two mortgages is a 28k 401k loan used for down payment on #2.

Depending what angle you want to look at it... I would not be able to afford the 3rd house with my day job @ 50k/year. With rental income from all 3, I would be able to cover 3rd house and increase my total rental income by 400-500/month.

Any road blocks I should be aware of with this approach? Any way to make it better?

[Brian Larson]

There are lots of things going on in your situation. I will throw out a few thoughts.

1. how long have you owned the rental properties? This will be important for your lender to know so they can 'count' it as income and not just carry it against you. I want to say 2 years as landlord and many conventional lenders give you the credit

2. with the 401k loan and other mortgages you may run up against DTI issues but if your properties cover than you should be ok

3. reserves may become an issue (borrowing to get $ for place doesn't usually count as reserves) but you are under 4 props so may be ok

I would run the specifics of your situation by @Jerry Padilla he always has the answer to the hard question

b