Heloc on Heloc on Heloc forever?

[Michael M.]

I just took out a HELOC to use as a down payment an investment property. My monthly payments will be low (interest only for 10 year draw period), so shouldn't really affect my debt to income ratio much.

Once I buy the investment property, can I immediately take out a HELOC on the investment home? Since I am putting down 25% and the house will appraise for more than I bought it for, the numbers should work.

And then can I do it again with the house I buy using that HELOC as downpayment? And keep doing this forever and continue to buy more properties? Or am I missing something?

[Mike Dorneman]

@Michael M. Simple answer is Yes. You will need to find a bank that will not require you to “season” the property though. Meaning, many banks will take the purchase price instead of the appraisal price within the first year of purchase. They do so to avoid lending to customers that want to do exactly what you are doing 😁. Don’t be discouraged though. I found a small local bank in my community that is very investor friendly. They don’t require me to season the property and they’ll loan based off the purchase price + renovation costs. They’ll loan 80% Bottom line is you can absolutely do this, you will just need to find the right bank. One other thing to note, these loans are commercial, no residential personal. The guidelines for commercial are much more Investor friendly.