Smart way to use HELOC?
Last year I purchased my first home with the intention of it becoming my first rental. Over this year my property has risen immensely in value. As of today the property has over $150k of equity in it. (I paid $278k last year). This wasn’t all luck, I bought in a very nice neighborhood knowing the new developments here would raise my property value. In my area this home will rent for $2100.00 per month (which I intend to do) my mortgage payment is only $1370 so it will cash flow $730 per month.
I want to get a HELOC on this property to cover the down payment on my next home that will be my new primary residence. (That way I can get away with 5% down) My new primary will be max $350k so around $17500 down without closing costs. Based on Comps I think the new home with have around $20k equity upon signing. I have the cash to fund the down payment, but I invest in the stock market (successfully) with said cash, and would rather not pull that money out since I can get a higher return on that cash in the market than the HELOC interest rate.
After doing this I would plan to pay the HELOC back ASAP with my first properties cash flow instead of paying myself to get it paid back sooner and remove the lien against my first property.
Cash in bank – $50k Income – $85k annual Debt (besides mortgage) – $0
Is this a smart/okay move to make to progress into further Realestate? Thoughts? Suggestion?