This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

You snowball plan has a very high success rate.

Interest on a HELOC is adjustable, if interest rates rise you are screwed.For you folks that weren't in real estate in 2003-2006 and when the market started collapsing in 2007.

What is the interest rate on the HELOC?

There is no stock account that gives the leverage real estate does, at as low interest rate real estate does, at as low risk/ volatility real estate does. 

Unfortunately, given current and foreseeable prices and interest rates, I will not be in the position to buy anything else anywhere I’d want to go. 

That was when the market was stabilized, rates were sub 4.5% and distressed properties actually sold for a significant discount.Today, distressed properties sell for a premium and cash out refi rates are over 8%. 

I’m told taxes and insurance is lot and will rise each year and cash flow is hard to come by.

$3,200 is probably a decent rate unless it’s new construction.

When evaluating markets for rental properties, there are a lot of factors to consider: population growth, employment rates, rent to price ratio/GRM/Cap Rate, rent trends, vacancy rates, etc.