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Time really flies…I can’t believe it’s Thursday already. Wow!
Tomorrow morning I have a notary coming over to my place so I can sign the documents to increase my HELOC from $26k to $50k. The pre-approval for the offer let me know that my place has increased in value and I am really excited. Why increase my line of credit? Why not?
The balance on the HELOC is still $0 with no plans to use the line any time soon. I am steadily paying down my CC balance, which is the result of refinancing my $26k HELOC. The current balance on my CC is now $20,000. So, I’ve paid it down almost $6k in the last 2 months, primarily using savings and reimbursements. I am still waiting for one grade from last semester. Then I can submit my forms for tuition reimbursement. That’s another $4,500 that I will use to pay down my CC.
I hope to eventually purchase investment rental property. I’ve wanted to do it for some time and even contemplated my first home purchase to be a 2-flat where I live in one unit and rent out the other. Unfortunately, when it came time to purchase, law school was starting in a month and I didn’t have the time to fully research, property search, and find out the true extent of becoming a landlord. Since a home purchase is nothing to rush into, I knew the same rule applied for investment property.
My hope is to get a job as an attorney next year once I finish law school and to eventually purchase my first property. I am curious to know people’s thoughts on leveraging on your primary residence to purchase an investment property.
Specifically, do you think it is a bad idea to use my $50,000 HELOC to purchase/place a down payment on an investment property in the near future, 1-2 years from now?
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3 comments:
Using your equity line for the down payment on an investment property is great idea. This is what I have been known to do...so of course I think it is good. LOL.
I have a suggestion, that you may or may not use. If you buy a 2 flat and live in 1 and rent out the other, I think it would be feasible to use a management company. I know this will cost a little money, but it has been my experience that renters will continually "bother" you if you are in close proximity. Although you may get lucky and they wouldn't, it would also be nice if they just thought you were a renter as well. Just a thought.
Thanks D! That's not just a thought...that is a GREAT thought!!!
The management company for the same building is a pretty good idea. I like it a lot.
I don't think there is anything wrong with having almost no equity in your primary residence. Home equity is wasted investment capital. That said, the HELOC is likely a variable rate loan. I am more of a fixed-rate-kind-of-guy. But, if you are in a hurry and there is some good deal out there for you, then it may be worth it.
I know a guy who took out a cash advance on his credit card to day trade. More investment capital is not always the best idea. It needs to come from a good, low-cost source.
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