HELOC on Investment Property: Pros, Cons, and How to Get One

HELOC on investment property is one of the smartest ways to unlock cash from a rental or investment property without selling it. If you’ve been thinking about using your property’s equity to grow your real estate portfolio or fund improvements, this is the guide that breaks it down in simple, real-world terms. You’ll learn how it works, who offers it, and what to watch out for.

Real estate investors often ask: “Can I really borrow against my rental property? Will it make sense?” The answer is yes, but there’s more to know than just filling out an application.

What is a HELOC on Investment Property?

A HELOC on investment property is basically a line of credit, backed by the equity you’ve built in your rental or investment property. Think of it like a credit card with a really big limit, but the money comes from your property’s value instead of a bank’s vault.

• You can borrow only what you need, when you need it.
• You pay interest only on what you borrow.
• The lender sets a maximum limit, usually based on your home’s value minus what you still owe.

It’s flexible. For example, if you want to renovate a rental unit or buy another property, a HELOC on rental property gives you access to cash fast—without selling or refinancing.

Who Offers HELOC on Investment Property?

Not every bank will do a HELOC on investment property. Lenders see rental homes as riskier than primary residences, so approval rules are stricter. Here’s a quick list of common options:

• Discover Home Loans – known for investment property lines.
• Credit unions that specialize in real estate investors.
• National banks with special investment property lending programs.

It’s worth shopping around because interest rates, fees, and borrowing limits vary. The goal is to find the best HELOC lenders for investment property that match your situation.

How a HELOC on Investment Property Works

Here’s the way it usually works in practice:

1. Lender evaluates your property’s current market value.
2. They subtract what you still owe on the mortgage.
3. They give you a line of credit, typically 70–80% of the equity.
4. You can borrow, pay it back, and borrow again as needed.

This is what makes it different from a home equity loan on rental property, which gives you one lump sum upfront. If you only need money occasionally, a HELOC is usually the smarter move.

Pros of HELOC on Investment Property

• Flexible access to cash – no need to borrow everything at once.
• Lower initial payments – interest-only options can keep early costs low.
• Funds for growth – renovate properties, fix maintenance issues, or buy new rentals.
• Leverage without selling – keep your properties and still pull out money.
• Potential tax benefits – interest might be deductible if used for investments (check with your accountant).

In short, it’s a tool for smart investors who know how to use their property to grow wealth.

Cons of HELOC on Investment Property

• Higher interest rates – lenders charge more because investment properties carry risk.
• Variable rates – your monthly payment can go up if interest rates rise.
• Strict approval requirements – high credit scores and strong income proof are usually needed.
• Risk of foreclosure – don’t make payments, and the lender can take the property.
• Limited options – fewer lenders offer this compared to primary home HELOCs.

So yes, it’s powerful—but it’s not for someone who wants “easy cash.” You need a plan.

HELOC vs Home Equity Loan vs Mortgage Equity Loan

Here’s a simple comparison to make it clear which route might work best:

This shows why a HELOC on investment property is often the preferred option for active investors. You can pull money when needed and repay it without locking into a big fixed payment.

How to Qualify for a HELOC on Investment Property

Lenders look closely at investment properties, so you need to meet certain criteria:

• Equity in the property – usually at least 20–30% available.
• Credit score – higher than 700 is ideal.
• Income and debt ratio – proof that you can handle extra debt.
• Rental income – showing steady income from tenants helps approval.
• Payment history – no late payments or defaults.

If your property is fully paid off, a home equity loan on paid off house is also an option to access funds quickly.

Steps to Take a HELOC on Investment Property

1. Check your equity – know how much you can safely borrow.
2. Review your credit – make sure everything looks good to lenders.
3. Shop around for lenders – compare rates, fees, and requirements.
4. Submit application – include all documentation about property and income.
5. Close the loan – review terms and repayment options carefully.
6. Use funds wisely – for property improvements, new acquisitions, or growth.

Taking a loan against your house or rental property is serious business. Treat it like a tool, not free money.

Tips for Using a HELOC on Investment Property

• Only borrow what’s necessary. Don’t treat it like an endless credit card.
• Invest in improvements that increase rental income or property value.
• Keep track of variable interest rates and adjust repayment plans accordingly.
• Maintain a reserve fund for vacancies or unexpected repairs.
• Always compare offers from multiple heloc lenders to get the best deal.

Conclusion:

A HELOC on investment property can be a game-changer for investors who know how to manage risk. It gives access to cash, flexibility, and opportunities for growth, but only when used wisely. Comparing it to other options like home equity loans on rental property or mortgage equity loans ensures you choose the best path for your investment strategy.

Frequently Asked Questions

Can anyone get a HELOC on investment property?

Approval requires strong credit, sufficient equity, and proof of income from your rental property. Not everyone qualifies.

How much can I borrow with a HELOC on rental property?

Usually 70–80% of your property’s value minus any outstanding mortgage balance.

Are interest rates higher for investment property HELOCs?

Yes, lenders charge more because rental homes are considered higher risk than primary residences.

Can I use HELOC funds for personal expenses?

Technically yes, but using the money for property improvements or new investments is smarter financially.

What’s the difference between HELOC and a home equity loan on paid off house?

HELOC offers flexible borrowing with variable rates, while home equity loans provide a fixed lump sum.

Who are the best HELOC lenders for investment property?

Discover Home Loans, credit unions, and certain national banks that specialize in investment lending.

Can HELOC interest be tax-deductible?

Yes, if used for investment purposes, but check with a tax professional to confirm.

What risks are involved with HELOCs on investment properties?

Variable rates, higher interest, and potential foreclosure if payments aren’t made on time.

How long does it take to get a HELOC on investment property?

The process usually takes 30–45 days, depending on lender and documentation.

Is pulling equity from a rental property worth it?

If funds are used for growth or improvements, it can be very beneficial—but it requires planning.