2nd deal. Is this wise?

[Elizabeth O.]

To finance my second rental property I am taking a HELOC out on my primary residence. I am not taking all the money I can but just enough to cover my 20-25% down payment. I went into this thinking that I would just wait 6 months and do a cash out refinance and repay the HELOC but I'm having a hard time finding deals that are this good.

I have come across a townhome in the same development as the one I rent out currently.  I may be able to pick it up for 120K with little to no work needed. 

I bought my current rental at 99K with 10% down and put a little over 15K into it to get it rented.  Currently I cash flow about $200 a month on it. 

In the deal I'm looking at, I will be able to cover the cost of both the mortgage and the HELOC at 2.99 interest only for 3 years and still cash flow. I should be able to do it after the interest only period of 3 years as well but very little cash flow.

Please give me your honest opinions.  I want to advance and grow in real estate investing  but at the same I am extremely cautious and don't want to make bad decisions I will regret.

Thank you so much for taking the time to read this!

[John Thedford]

If the right situation you are better off buying investment property. Equity sitting in your house doesn't give you cash flow, depreciation, tax benefits, and appreciation. The deal must be right to justify pulling the equity out so make sure that it fits your needs and expectations.