HELOC. Variable or Fixed

[Bo Davis]

Looking to get a HELOC on my personal home to invest into my first STR. I'm stuck in picking what the best payment method would be. They are trying to get me into a fixed rate at 7.25% and the variable starts at 9%. My line of thinking is that the rates HAVE to be dropping below 7.25 rather than always being stuck there. Let me know if I'm crazy or not!

[Travis Timmons]

Do you have cash to put down and the HELOC for renovations, furnishings, etc. OR are you trying to buy a house with 100% funds from the HELOC? If this is your first STR, do not underestimate the expense and time it takes to get a property to market. It sucks and you'll be bleeding cash for 1-4 months - perhaps longer if you are waiting for your market's busy season to come.

I've worked in commodity, real estate, and transportation markets and have learned 1 thing. The market does not HAVE to do anything or behave rationally. Take the fixed option and underwrite with a 7.25% rate.