Using a HELOC for Down Payment w/ No Cash Flow?

[Ernie Sturzinger]

Hey BP! I am a very new investor. I just closed on one investment property and have my eyes set on a second one. I have a question about using a HELOC to make it possible to work on this second deal.

I am thinking about using a HELOC for a down payment. The 4-plex I am looking at has a 12% cash on cash return per the BP Rental Property Calculator (this includes 5% set aside for vacancy and 10% set aside for maintenance/CapX). After all expenses, so long as all 4 units are rented, I would cash flow just enough to cover the P&I of my HELOC. So basically, I would put none of my own money down for this investment, but would be using virtually all my cash flow to pay my HELOC back each month over 20 year period.

The only way I can afford to do this second deal is to utilize this HELOC for a down payment. I am looking for any advice on if this strategy is wise or not. I know there are always variables to consider in addition to the information here. I appreciate any/all feedback and am open to additional questions as needed.

Thanks! 

[Eric M.]

If you are cash flowing just enough to cover your HELOC then you aren't actually getting any cash flow. I wouldn't do a deal that doesn't cash flow. Don't fall in love with the property, fall in love with the deal.