In the past one could use the HELOC approach...I did for the first few investment properties I owned.

Alot depends on your short and long term goals...and where you are doing the investments. If I were you I would create a spreadsheet detailing all of your long and short term costs associated with:
1) An investment you would like to have
2) An actual property
And look at the yearly costs, then 3 and 5 yr possible appreciation.

Alot depends also on how long you plan to be in that primary residence. I would treat the HELOC money as a temporary loan to leverage a downpayment on a 2nd home, and set up a specific amount of money to payback that downpayment monies from the income of the second home.

If you are not recieving money from the second home, still treat it as an income producing property to clear in your mind how and for how long are you going to have the 2nd property..and what is the long term growth outlook to get back not just the cost, but also some possible built up equity in this 2nd home.

Wed Jul 9 2008, 23:37

I am not aware of a program where you can use equity in your primary residence to purchase investment property. The down payment required would have to be in cash -- and investment guidelines have become tighter in the past few months.

If you mean cashing out your primary residence (after the Heloc balance has been paid) for the down payment, you need to review your current interest rates on your first mortgage, heloc and prospective investment property and determine what the best solution for you is.

I've heard HELOCs are becoming more volatile. You might want to consider refinancing your HELOC into your first mortgage to get a fixed rate and have a more predictable payment.

Wed Jul 9 2008, 13:41