You are essentially taking on debt to acquire more debt. If the real estate market dips, you could end up "underwater" on both properties. Strategic Tips for Success
You only pay interest on the amount you actually draw. If you find a property for less than your credit limit, you don't pay for the excess. using heloc to buy rental property
Interest on a HELOC used to "buy, build, or substantially improve" a home may be tax-deductible (consult a tax professional regarding investment property specifics). You are essentially taking on debt to acquire more debt
If the rental property fails to generate enough cash flow and you cannot make the HELOC payments, you risk foreclosure on your primary residence . If you find a property for less than
Maintain a cash reserve to cover vacancies or unexpected repairs so you never have to choose between fixing a rental roof and paying your home’s HELOC.
Many investors use a HELOC to buy and renovate a property, then refinance that property into a long-term mortgage to pay back the HELOC. This "resets" the line of credit for the next purchase.