Down Payment?!

[millennialonfire]

I am interested in buying a rental property in the next few years and was wondering what type of accounts people use for saving for the down payment. Do people usually contribute less to retirement accounts in order to save faster for a down payment in a taxable or high interest savings account? It will probably take me 2 years to save enough for a down payment and I hate the idea of that just sitting in my regular savings account. Thanks!

[Cwadda]

Do you have a primary home?

[millennialonfire]

Yes and I am not looking to living in the investment property for the FHA financing with lower down payment. So i will likely be facing 20-25% down payment as an investment property.

[Cwadda]

How much equity do you have? You may be able to consider a Home Equity Line of Credit - using those funds for the downpayment and mortgage the rest.

[millennialonfire]

I am leaning towards doing a heloc since i have about $60k in equity in my primary residence. This would allow me to continue investing full speed with my retirement accounts up until I am ready to purchase.

[okobrien]

I agree that the HELOC can be a great tool if used wisely. 

As far as retirement accounts go, I would stop putting money into them if you have better opportunities outside of stocks and bonds.  Personally, I wish I had put less money into retirement accounts in the past, and kept all of it liquid for real estate opportunities.  I have put about the same amount of money into retirement accounts and real estate over the years, and the real estate cash has delivered over 10x the returns of the retirement accounts.

[Cwadda]

I am leaning towards doing a heloc since i have about $60k in equity in my primary residence. This would allow me to continue investing full speed with my retirement accounts up until I am ready to purchase.

Start talking to local banks about it. If you meet the qualifications then you could get cash from it quickly. Definitely enough for a down payment.