Best way to leverage a paid off house to acquire more properties?

[JR Woolf]

Relatively new to the game. Currently own 3 STVRS in good vacation markets. 2 Gross over 50k and 60k each annually and 3rd just went on the market and that one is paid off entirely and we anticipate it should do the same in annual rentals. Market value is around $380k on the paid off house. We now have an opportunity to purchase another STVR down the road for $245k (turn key- fully furnished) with 2019 annual rents of $40k+.

My question is - does it make sense to take out a HELOC on the paid off house and just purchase the new property outright using $245k of the HELOC money. Based on current advertised rates I am estimating that during my 10 year draw period my interest only payments will be around $816/mo. So essentially I would have 2 income generating properties for $816/mo. I am 100% confident that between the 2 I could easily cover the HELOC payments even if the rates adjust. And still use some of the cash flow to pay down the heloc as I go.

Theoretically- could I continue to acquire more properties this way by taking out a HELOC on the most recently purchase property assuming of course that I meet the requisite LTV?

Other than the adjustable feature of the HELOC- is there any downside that I am missing or is a cash out refi a better way to go and if so why? I like the idea of the $0 closing costs on the HELOC.

Advice or suggestions appreciated.

[Michael Baum]

Hey @JR Woolf, I agree with @John Underwood (I usually do!) with his plan. A small HELOC to get your downpayment and then just purchase the property outright.

No worries about the whole nut going crazy APR later with a fixed. Then just drop all the cash on the HELOC, finish it off then hit the primary.

Sounds like you have a sweet thing going. Where are all the VR's located? Very cool!