i have about 35000 of equity in my current home. thought i could attempt to get a heloc. i will use this to get my 20% down payment to avoid pmi. get a mortgage to finance the other 80% with the intention of renting it out. use my heloc for any neccesary repairs. only thing is my credit score is 640. is this too low for a heloc?
Kimesha,
There are a lot of different schools of thought here. I’ve talked with more experienced investors than myself and some say use HELOCS, some say don’t. My gut feeling is that I am opposed to them. Here’s why: when you take a HELOC out you’re putting your primary residence at risk unnecesarrily.Another way to word it is, if there were more ways to get started buying rentals, other than using a HELOC, would you be willing to try them?
I feel like I might be speaking out of place, because I don’t currently own rentals. I only fix and flip. But this year I am planning on buying a bunch of them. Here’s what I am wanting to do. Instead of taking money out of my pocket, I want to use rehab loans to “get my foot in the door.” Once the rehab is complete and I have a built in equity cushion, I’ll refinance and turn it into a rental. If done correctly, this can be accomplished without providing a down-payment. So basically you’re buying a house with other people’s money, fixing it with other people’s money and using the equity to refinance. It sounds good in theory, but like I said, I haven’t done it yet myself. Try to read some posts by DaveT. He has been very helpful to me in explaining the rental thing. Good luck.
When you use a HELOC you are putting your house at risk.
So if you choose to use your HELOC I would suggest that you do extra, extra due diligence on the properties you invest in.
You have to treat your HELOC as would a HML or as a private investor which means separate your self as if you are a HML or PI that way you are training your self as if you are these entities and you get good experience protecting your collateral and limiting your risk
I would ask HML or PI how they make their decisions and maybe even do an apprentice type of idea. YOU will LEARN ALOT FROM THEM. :-*
i would rather use my heloc as an emergency fund. that
way if i get strapped for cash, i use it.
but i confess, in the past i have pulled out 16k from my 100k
equity to put 10% down on a rental.
but it was only a small portion of the equity in my home.
it also makes sense to have 6 months living expenses stashed away before u start investing.
What I would do is obtain the HELOC and rent out your curent residence. Buy as many property as you can while saving a kitty for a rainy day.