Pay off HELOC or not?

I am a new investor and in the past 6 mos I have purchased 2 SFH using HELOC from my personal residence. I have both rented out generating $230, $130 cash flow to “stable” tenants. I currently owe 17000 on my HELOC with a variable rate currently around 9.5%. I have another HELOC maxed out on a second vacation property for 30,000 currently around 7%. This HELOC paid for my truck note, Harley note, and some personal debt. I am really enjoying this landlord thing so far. I would like to continue to buy property and rent them out. Both rentals were bought close to retail prices and I am going to be more selective in my search. However I don’t want to extend myself to far. I have a good stable job making decent money. Would you try to pay down the HELOC’s first before buying any more property or would you use the remaining cushion to pay my next 10% down payment? Leaving little safety net.
Or should I use my tax return ~5000 to help pay the next downpayment? I was planning on using that cash to pay down heloc. What do you all think?

keep investing. As long as you can handle your fulltime job and your rentals, keep getting more.

I think Real Estate debt is good debt. If you have other higher interest debt work on that first. If you don’t, just keep going with what you have and when you max out then you can re-evaluate.

It seems unwize to max out all your resources but most every business goes through a tight period starting out. REI is the same.

Definately take your time and look for bargains that will maximize your investment instead of buying at FMV because you can.


I’m very interested in your question. I have a similar story with the situation I am in. I can totally relate to the quandry. I can’t wait to see what kind of feedback we get from others here.

I have a triplex and a single family in a town about an hour north of here (where my kids live). And I have a fourplex and duplex in town where I live, plus my personal residence. My personal residence has two bedrooms downstairs that I can rent out, but they aren’t being rented now. So a total of 12 rental units.

I have 2 heloc’s that aren’t maxed out (about 14k left). I’ve been using them for repairs, improvements and catching up on bills. I bought the s/f I rent out for 15k cash (thanks for the inheritance Mom, may she rest in peace). I put about 10k into it to rehab it. Now I think it is worth about 40k.

So how to proceed. I have around 35k in equity in my house and 20k in the s/f I rent. And 14k in heloc’s still to use on both combined.

I keep fighting fears that my heloc’s will run out because of all the bills and vacancies (3). It is winter here and the utility bill for the triplex for last month was over $700, for example (I’m eligible for the budget plan on it finally in April).

I’ve wondered if I should refi on my house or the single family I rent out (each has a heloc on it). Or, I’ve wondered if it isn’t time to cash out on the s/f I rent.

I’d like to get to where I have at least 20 rental units. If I had 30-40 that were all close to rented out, I could probably quit my full-time job. But how in the world do I find the time to get to 30-40 and keep my sanity. I’m single and don’t have a spouse or significant other to help.

There is an 8-plex for sale a few blocks from my 4-plex for 169k (with 2 vacancies the last time I looked). It would be good cash flow fully rented out, but probably in need of repair. Most of the buildings around here are old.

All feedback welcome! ;D

I think I have decided to keep looking for property and if I can get one 10% below retail to use whatever resources I have (i.e. tax return, HELOC). People are still calling about my last vacancy so I need to be able to supply a house!


Question Proponet, is there any equity in your investments that you could free up to continue your investing interests?

I would only have minimal equity in both houses since I paid 10% down on both rentals within the last 6 months. I paid close to retail on both so not much equity yet.

Prime rate has increased every fed meeting in about the past two years. A lot of my clients have refinaced those HELOC’s into fixed 2nds. I wouldn’t pay down any real estate debt, keep your cash. Cash flow is everything!
Also, look for properties that are undevalued, do not pay retail for properties, you are an investor.
You can purchase properties for 100%, and there are many programs with short seasong requirements; you can then refi at a lower LTV maximizing cash flow, which in turn builds you portfolio with no money down. :wink:

I realize I am an investor but as long as I get cash flow out of a house is it a bad investment if I pay close to retail? There is a house that went up for sale yest that is right next to my last rental property. It is a nice updated home that is move in ready for the next tenant and I won’t have to waste alot of time with new paint, carpet, etc. It will still cash flow 150 bucks a month.

Plus I understand that the non owner occupied 80/20 is going bye bye. I can get that financing if i get rate locked by 2/24 and closed by april. SO I am in a bit of a time crunch.

As I understand it, it’s certain lenders that may stop doing those programs, but there’s certainly a lot of other banks that still do them.

I know of one credit union that still does them and at a very good rate. Just looked and they’re still at 5.75% for an 80% mortage on NOO with 2 points. That’s a 12 year balloon based on a 30 year payment. Lots of other different products like that out there. Just gotta find the right one.