HELOC - how to make numbers work with a second mortgage

[Stephen Brieloff]

I have owned my primary residence for over 2 years now and have been toying with the idea of a HELOC in order to leverage those funds to invest in another real estate opportunity. The challenge I am having is that the HELOC is an additional mortgage. So if I use those funds to invest in another real estate opportunity, I then have a mortgage on my primary, plus the mortgage on the new property, plus the HELOC payment. This has been a challenging mental block for me to overcome. Of course, if the numbers are great and the rental income you get is greater than all expenses, including the HELOC payment, everything works out. But I'm having a hard time finding opportunities like this.

How have others overcome this challenge?

[Cristina Alicea]

@Stephen Brieloff

HELOC is a home equity line of credit, which is different than a second mortgage otherwise known as a home equity loan. A HELOC functions like a credit card. You can use the funds and then pay them off and then use them again, just like a credit card. I just bought my third property using funds from a HELOC. You have to make sure your property cash flows well to have it make sense, but it is a great way to leverage the equity in your home.