Should I use a HELOC to buy an investment property?

[Brett Chandler]

Hey there! My name is Brett. I have been doing some research in the articles and forums here. This is my first post. I have some questions and ideas about how to get into the investment property game. I’m hoping that some of you experienced folks can offer some guidance, criticism, or just shoot holes in my plan. Let me start with a little background. I’m 32, married with 3 kids (7 months - 7 years), living in the Portland, OR area. I’m a public employee, eligible to retire in 2040. My goal is to build up a portfolio with a handful of rentals by the time I retire to create passive income in retirement to either enjoy, give away, or reinvest to create generational wealth. 

I have some construction background and am fortunate enough to have a work schedule that would allow me to buy a distressed property, flip, and hold. That will be my primary means of investing in the future. I won’t have the time to commit to that for 5ish years (when all the kids are in school). In the meantime, I’m looking at investing in something more “turnkey”. 

My thought is to take out a HELOC on my home (150-200K), and use it to pay "cash" for a 150k condo (150-200k single family homes don't exist in this area without the need for significant TLC). Then, I would use the rental income to cover the HELOC payments and aggressively pay down the principal with my own contributions. Once I have the HELOC at a zero balance, I would repeat the same process, but more quickly with the added rental income of the first unit. Then rinse and repeat until I have the time to commit to a rehab.

Well, that post ended up being a bit longer than I meant for it to. Thanks for hanging in there with me. I would really appreciate any feedback you have. Thanks!