Scenario 1: Get the HELOC and Invest
Scenario 2: Pay Cash
Scenario 3: Get the HELOC and a mistake
This is a more complex question than it may seem at first. From a simple perspective, you want to analyze what the true expected future rate of return is on the property including all costs such as maintenance, future upgrades, vacancy, taxes and more. Then compare that true rate of return with the other options you have for the money, accounting for differences in risk.
Also Covered:
High Valuations = Lower Expected Future Returns
Impact of taxes and transaction costs
Your desired life trumps the money
Full Article Also Covers:
Sell Part of the Property
Replace the HELOC with a HELOC
Be Wary of Advice to Roll the First into a HELOC
How to calcluate the net present value of the bank’s offers
How banks calculate their offers
Estimating how long will you keep the mortgage
The rate of return on alternative uses for the funds
Multi-decade tax planning and mortgage points
INVEST MORE AGGRESSIVELY
OPEN A HEALTH SAVINGS ACCOUNT (HSA)
SAVE UP FOR A DUPLEX/TRIPLEX
SAVE UP TO START A BUSINESS
BUY A HOUSE
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