The term HELOC (or again, “Home Equity Line of Credit”) is often applied specifically to revolving credit facilities that are secured by the equity built into your home. However, HELOCs can be used in conjunction with your investment properties – although they will be simply referred to a real estate secured line of credit rather than a HELOC. There are number of reasons why you may want to extract the equity in your investment properties. Foremost, you make want to make improvements to the property which will allow you to further boost the equity in the property, boost the value of the property, and provide you with the ability to raise the rent for tenants.
Additional uses for lines of credit on investment properties include the acquisition of additional properties. If you are a well seasoned real estate investor that is seeking to acquire and manage a number of different properties then you can quite simply cash out the equity in once residence with the intent to purchase an additional residence. This is especially important for tax planning purposes as loans are not considered to be a taxable event.
However, like with any investment, you must be very careful when leveraging your investments to expand your portfolio. In the credit and housing market crises of the past three years, many real estate investors (both seasoned and novice) lost everything they owned (and then some) by continuing to refinance and leverage properties that had increased in value. In regards to obtaining a line of credit for a non-primary residence, it has become more difficult to obtain this type of credit facility. Again, if you have strong credit and substantial equity in your investment properties – it should not be a major problem. We encourage you to use the HELOC Equity Property Tools available on this website to assist you in properly planning your acquisition of real estate credit.
As we can see, an HELOC Equity facility can be very helpful when structuring your real estate portfolio, extracting equity for important purchases, and for acquiring new properties if you are actively engaged in real estate investment.