Buying a 2nd rental with a small down payment - DMV area

[Carol Bahou]

Hello all  - my husband and I want to buy a second investment property in our area (Frederick, MD).  We have a primary mortgage (in Frederick) and one rental property in Bethesda, MD.  The rental property is rented until December 2024.  What are my options if we only have a small down payment when trying to buy a second rental property?  

We have some equity we could tap into in both homes, should we take a HELOC? Or is that too risky because rates are so high?

[Benjamin Aaker]

Congrats on your plan to get another investment property. It depends on what you mean by a small down payment. You can get a HELOC on your primary residence but would need a commercial line of credit on the investment property. That will probably have a slightly higher rate. Talk to the bank(s) that have the current mortgages about this possibility. You likely won't want to refinance, so lines of credit are your next-best option. They will have a higher rate than refinancing, but not a whole lot. They will probably be variable, though. Not so bad right now, as I think that the rate increases will taper off. At least with a LOC, you can determine how much to take out and the money sits ready not accruing any interest until you use it. I'm a big fan of LOC and don't think they are too risky. Make sure yours has a maximum interest rate and make sure that your prospective deal works even at that rate. Good luck with your investments!