Newbie into real estate. Im in the process of securing a loan for the purchase of my first piece of investment property. Loan officer suggested i have up $70K in a heloc that i could use to purchase a house. What are the advantages/disadvantages with buying a low cost $30-$50k single family home in full rather than getting a bank loan paying 20% down. I clearly understand having as little as possible of my personal money involved/at risk is an advantage, but what are the other pitfalls or upside that i may encounter with heloc purchase rather than bank loan?
Lower interest rates than HML or most private money
Very low loan fees
Only pay interest on the portion of money you're using
Disadvantages of using a HELOC:
Higher interest rate than a conventional loan
Shorter amortization
Tied to your primary residence, so if things really go South your home may be in jeopardy (low risk, I think)
One other thing to consider is that you may not be able to get financing on such an inexpensive property. Most lenders have a $75-100k minimum. An alternative might be to get a bunch under your belt and then put them all under a blanket loan, you may still run into issues with minimum values, though.