Buying first rental with HELOC

[Bill Bob]

Hello all my name is William and I'm still on the hunt for my first property. I'm about to get my preapproval and hopefully my first property soon thereafter. The question I have is I was planning on using my HELOC for a down payment. I was wondering if just calculating the monthly payback of the HELOC with all other costs/expenses of the home is what everyone does to see if the numbers still work or if they avoid using HELOC at all costs? Thanks in advance!

[Scott E.]

If you are using a HELOC as your down payment on an investment property then yes you need to account for that HELOC payment in your underwriting. Even though the HELOC is technically not tied to the investment property, it still should be looked at as a 2nd mortgage and part of your debt service.