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Investing in Real Estate Using Lines of Credit

Buying investment property with a Home Equity Line Of Credit (HELOC) is an excellent idea if you’re confident that the property you’re investing in will produce a profit. Personally, I don’t like to have my money sitting around doing nothing for me. I like my money to make more money. Investing in real estate with a HELOC is a great way to do that but you should be aware of the risks. Understand what you’re doing here. Using your HELOC to buy investment property means that you’re putting your home up as collateral for the loan that you’re investing on another property. So ask yourself, “if the tenants don’t pay rent on time, can you still cover the monthly cost of the HELOC?” If the answer is “Yes”, then you’re halfway there. Another factor that you’d want to look at is how much interest you’re going to be paying on the HELOC vs the Return On Investment (ROI). In other words, If you’re earning 10% on the property and only paying 5% on the HELOC, You’re in business!! However if the interest rate that you’re paying for the HELOC is more than your return on the property, it’s not a good investment.

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