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Real estate investors are increasingly turning to Home Equity Lines of Credit (HELOCs) as a flexible tool to tap into equity from rental properties and multi-family homes. While HELOCs on primary residences are fairly common, using them for investment properties comes with specific rules and considerations.
In this article, we break down everything you need to know about investment property HELOCs, how they differ from traditional HELOCs, and how you can use them to grow your real estate portfolio.
What is a HELOC?
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured against the equity in your property. It allows you to borrow as needed up to a set limit, repay, and borrow again—similar to a credit card, but with much lower interest rates.
For investors, a HELOC can serve as a powerful financing tool for property upgrades, new investments, or bridging short-term capital gaps.
Can You Get a HELOC on an Investment Property?
Yes, but with caveats.
Lenders do offer HELOCs on investment properties, including single-family rentals, duplexes, and multifamily units. However, eligibility requirements are stricter, interest rates are higher, and fewer lenders provide them compared to owner-occupied properties.
Typical Eligibility Criteria:
- High Credit Score: Usually 700+
- Lower LTV Ratios: Often 65-75% max Loan-to-Value (vs. 80-90% on primary homes)
- Strong Income & Cash Reserves
- Proven Rental Income
- Property Condition: The asset must be in good shape and generate income consistently
Want help assessing your HELOC eligibility? Contact our investment property lending team for a free consultation.
Rules for Rental Homes vs. Multifamily Units
The rules and accessibility of HELOCs differ based on the type of investment property:
1. Rental Homes (1-4 Units)
- Typically easier to qualify for than larger properties
- Some lenders treat 1-4 unit homes like residential properties
- You’ll still need to show stable rental income and good credit
- HELOC amounts may be lower depending on occupancy rates and location
2. Multifamily Units (5+ Units)
- Considered commercial real estate
- HELOCs on these are rare; lenders may offer commercial lines of credit instead
- Stricter underwriting processes apply, including business financials, CAP rate analysis, and DSCR (Debt-Service Coverage Ratio) reviews
Note: If you’re investing in multifamily, consider hybrid financial tools like blanket loans or portfolio lines of credit.
Not sure if your multifamily qualifies? Schedule a free property finance review with our experts.
Pros and Cons of HELOCs on Investment Properties
Pros:
- Flexible Financing: Use funds as needed, ideal for renovation or acquisitions
- Interest-Only Options: Pay only interest during draw period (usually first 5–10 years)
- Reusability: Pay down and reuse without reapplying
- Tax Deductibility: Interest may be deductible if funds are used for property improvements (consult your CPA)
Cons:
- Stricter Lending Requirements
- Higher Interest Rates
- Variable Interest Rates
- Potential Foreclosure Risk if unable to repay
Smart Ways to Use an Investment HELOC
- Renovate to Increase Rents or Property Value
- Make a Down Payment on Another Investment
- Bridge Financing between buying and selling
- Emergency Capital Reserve
- Pay Off Higher-Interest Debt
Ready to unlock equity in your rental property? Explore your custom HELOC options with our team today.
FAQ: Investment Property HELOCs
Can I get a HELOC on a property held in an LLC?
Some lenders allow it, but many require the property to be personally owned. Commercial lenders may be more flexible with LLC-held assets.
Are interest rates higher for investment property HELOCs?
Yes. Expect to pay about 1–2% higher than a primary residence HELOC.
Is HELOC interest tax deductible?
Only if the funds are used to improve the secured property. Always consult a tax advisor for specifics.
Read Next
For tailored strategies and more resources on financing your real estate investments, explore our full Real Estate Financing Hub.
Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
