Recommended ways to effectively use the HELOC

[Frank Trigoso]

What ways will you recommend to use the HELOC? I have 25k available. I am trying to puzzle together different ways to purchase another property by the using HELOC. Do you recommend using the HELOC as a down payment? It even crossed my mind to refinance the property that I used the HELOC on to pay off the HELOC balance. Any feedback will be helpful. I would like to leverage, buy not overly extend myself. Thank you in advance.

[Edward B.]

@Frank Trigoso,

I think you are on the right track. The beauty of a HELOC is that you can borrow, payoff, and borrow again at a very favorable rate without having to ask the bank for permission each time. So in my opinion, it is best used for short term use strategies such as a fix and flip or BRRRR.

If you just use it for a down payment, then you will be tapped out and looking for more money for another down payment. Also, the drawback of the HELOC is that it is a variable rate so if rates go up, which is very likely, your payment will increase and you need to account for that in your investment evaluation.