I'm kind of in the same position you are. However, I did get a HELOC on my personal home to get me started and I now have 3 rentals and have flipped one after renting it for awhile. I still feel like a newbie. I took out a HELOC's on one rental to buy the next one too (down payment and reno).
It sounds like not many investors do the HELOC thing and it is rare, but I did and its works out ok-otherwise I wouldn't have been able to do this. The problem with it is the HELOC's have variable rates so if rates go up they will also increase but right now its at like 3.5% and interest only so its a great loan.
I'm interested to see what other options people share with you. I used the HELOC on my rental to put a down payment and rehab for my newest rental. Now I have over $30k cash tied up in that house plus quite a bit of equity, so I'm trying to figure out how to get that cash out without having to do a refi cash out-(which my lender says isn't the best loan). A lot of lenders won't HELOC on a rental. I think I got lucky on the last one because my lender was my property manager and he pretty much just gave it to me with no questions asked. He's no longer there though.
I just learned this: from other investors and my own experience is if you purchase a "flip" with a mortgage (putting 20% down) then fix it up and try to flip it or refi it within the year or so it won't appraise for high enough. Reason is-appraisors mostly look at square footage and bathrooms/bedrooms etc. So if you are just doing cosmetics the appraisers are going to to look at it and think "This thing sold for $XXX only 6 months ago-sure they did some improvements but I'm only going to appraise it for $5000 more" etc. This happened to me and my mom.
We completely gutted our house-pretty much down to the studs. It was a 1978 house with dark oak, orange carpet in the kitchen, 7 layers of wallpaper etc. We installed wood floors, new bathrooms, new kitchens with granite etc. $60k remodel minimum and refinanced it a year later and they only increased the value by $5k due to no change in square footage and bathrooms/bedrooms etc and they chose terrible comps. A year later we did another appraisal and got a better number but still not even close to what similar homes are selling for. We did a market analysis and smaller homes that are not remodeled in our neighborhood sold for quite a bit more than ours appraised for. The appraisals are kind of a joke.
The best thing to do is to buy the house initially with cash so there's no appraisal, then get it appraised after the remodel (whether you keep it or sell it). That's what I need to do now. I'm trying to figure out how to get the cash money up front!
