All Forum Posts by: Emanuela Hall

Yes, you can use a HELOC for the down payment. There are a few little things to consider, but generally that works well.

If you get your long-term rental in very well performing locations you can use the positive cash flow to pay the HElOC back.

Just to give you the math (the numbers are simplified to make it easy to follow):

- You get the HELOC for 70% of the equity = $260K * 70% = $182K

- you use $75K for the down payment of the $300k investment property

- If you have $500/month positive cash flow it will take you $75000/$500=150 month to pay back the HELOC

- When looking at really well-performing deals between 1% rule and 2% rule, you could probably three properties, professionally managed in the right location, each generating $333/month in positive cash flow, so your HELOC would be paid back in about 6 years.

- Keep in mind that a HELOC has the benefit of requiring you to only pay interest on the actual balance. That means each month you pay down the $75K (just an example) you took out, the payment for interest gets lower.

- The other nice thing is that you can always use a HELOC like this as your reserve, so you don't really have to put money for vacancy, CAPEX and vacancy aside and use the full positive cash flow each month for pay-back

I realize that this is a bunch of stuff to consider. If you like to chat about it, let me know. Happy to have a call.

Hi Emanuela,

You could consider doing a HELOC but I would say that's only up until the amount where the rent covers the full payment and then some. You want to make sure that it's paying itself down not just maintaining the HELOC.

Some combination of that and cash should be pretty favorable for you!

 What was the reasoning for wanting to pay off the rental? Typically you want the debt with the property and putting that debt on your primary is generally a no-no unless its short term.

If I were you I'd pull out 70% equity from the rental property, go find another house under market value to fix up and force appreciation. 

Say your rental is worth 100k, pull out 70k, find a property for 40k, and put 20k into, and 10k into holding costs and extra buffer.

Refinance that rental at say 100k,at 70% LTV and get 70k back.

Now with the 70k you can either pay off the first rental again, pay off the additional amount you put on your primary residence or use that money to scale and buy more. Now these are arbitrary values but you get the point.

Hope this helps!