HELOC for downpayment

[Spencer Harvey]

I’ve been trying to figure out a way to purchase more rental properties and grow my portfolio. I currently own two properties that cash flow nicely, plus my primary residence which I have ~$70k in equity.

I opened a HELOC on my primary home a while back and have gone back in forth in my own head on what to do with it. My initial plan was to use the HELOC funds as down-payments on a couple of additional rentals, and then use the cash flow to pay down the money taken from the HELOC. Over the course of a few years, the additional properties would essentially be free and my HELOC balance would be back to $0 so I could rinse and repeat.

That being said, I've heard several times to stay away from becoming over leveraged. While it seems to be a common suggestion, what exactly does that mean? If the additional properties I purchase using the HELOC cash flow and bring in positive income, what risk is there by being "over leveraged"?

I’m looking for input or advice on how to proceed given my current situation.

Thanks in advance!