Can You Get a HELOC on an Investment Property? What to Know and Where to Get One

You can get a HELOC on an investment property, but qualifying is more difficult than getting one on your primary residence. Lenders view investment properties as higher risk, which means stricter requirements, higher interest rates, and fewer lender options.

There are two main ways investors use HELOCs for real estate. One option is to secure a HELOC directly against an investment property you already own. Another is to tap the equity in your primary residence and use those funds to purchase or improve an investment property.

This guide focuses mainly on HELOCs secured by investment properties themselves. Here’s what you need to know.

Table of Contents

1. How a HELOC on an investment property works
2. How to qualify for a HELOC on an investment property
3. Lenders that offer investment property HELOCs
4. Pros and cons of investment property HELOCs
5. Investment property HELOC alternatives
6. When does a HELOC on an investment property make sense?
7. Frequently asked questions
   1. How long does it take to get approved for a HELOC on an investment property?
   2. Can I get a HELOC on multiple investment properties?
   3. Do all lenders offer HELOCs on investment properties?
   4. Is the interest on an investment property HELOC tax-deductible?

How a HELOC on an investment property works

A HELOC on an investment property functions similarly to a HELOC on your primary residence. You borrow against the equity in your rental or investment property, receive a revolving line of credit, and typically only pay interest on what you actually use during the draw period (typically five to 10 years).

After the draw period ends, you enter a repayment phase where you pay back both principal and interest, usually for up to 20 years or more.

The primary differences are in the costs and the eligibility criteria. Because investment properties are riskier for lenders, they tend to have stricter guidelines for approval and slightly higher interest rates—think 2% higher.

How to qualify for a HELOC on an investment property

Getting approved for an investment property HELOC requires meeting higher standards than a traditional HELOC. Lenders want to see that you can handle the additional debt even if your rental income temporarily drops. Here’s what they look for:

• Credit score: Most lenders require a minimum score of 700 to 720 for investment property HELOCs, compared to 620 to 680 for primary residences.
• Income: You’ll need strong, documented income. Some lenders allow you to count stable rental income toward your total income, but you’ll need to provide lease agreements and tax returns showing Schedule E income.
• Collateral (LTV): Expect maximum loan-to-value ratios of 75% to 80% for investment properties, versus 85% to 90% for primary residences. This means you need at least 20% to 25% equity in the property.
• DTI: Your debt-to-income ratio should typically stay below 43%, though some lenders may allow up to 50% with strong compensating factors.
• Rental income: Lenders want proof of positive cash flow. You’ll need to provide lease agreements, rent rolls, and tax documentation showing your property generates consistent income.
• Cash reserves: Many lenders require six months of mortgage payments saved in cash reserves. This protects them if your property sits vacant or needs unexpected repairs.
• Appraisal: An updated appraisal determines your property’s current market value and ensures it qualifies as acceptable collateral.

Lenders that offer investment property HELOCs

Not all lenders offer HELOCs on investment properties, so you’ll need to do some research to find options. Here’s a comparison of four lenders to help you get started on your search:

Pros and cons of investment property HELOCs

Before applying for an investment property HELOC, it’s important to weigh both the advantages and drawbacks.

Pros

• Flexible access to capital

  A HELOC gives you a revolving line of credit you can tap into as needed. This makes it ideal for ongoing renovation projects, surprise repairs, or seizing time-sensitive investment opportunities like below-market property purchases.

• Lower rates than personal loans or credit cards

  Even with the premium charged for investment properties, HELOC rates typically run lower than unsecured financing options. This can save you thousands in interest if you need to fund improvements or bridge financing gaps.

• Potential tax benefits for property improvements

  If you use HELOC funds to substantially improve the same investment property securing the loan, the interest may be tax-deductible. Consult a tax professional to understand your specific situation and current tax rules.

Cons

• Higher interest rates

  Expect to pay 2 percentage points more in interest compared to a primary residence HELOC.

• Stricter qualification requirements

  The higher credit scores, lower LTV ratios, and cash reserve requirements make it harder to qualify. You’ll also face more scrutiny of your rental income and property management history.

• Risk of losing the investment property

  If you can’t make your payments, the lender can foreclose on your investment property. While losing a rental property is less devastating than losing your primary home, it can still damage your credit and investment portfolio.

Investment property HELOC alternatives

If an investment property HELOC doesn’t fit your needs or you simply want to research all of your options, consider these alternatives:

• HELOC on a primary residence: It may be easier to qualify for with better rates, but it puts your home at risk. This option can work well if you have substantial equity in your primary residence and want to use it to fund investment purchases or renovations.
• Cash-out refinance: A cash-out refinance replaces your current mortgage with a larger loan and allows you to take the difference in cash. You can typically access up to 80% of your investment property’s value. This option makes sense if you can secure a lower interest rate than your current mortgage or need a large lump sum.
• Home equity loan: Similar to a HELOC, a home equity loan provides a lump sum with a fixed interest rate. This works better if you know exactly how much you need and prefer predictable monthly payments.
• Hard money loan: Hard money loans are short-term loans based on the property’s value rather than your creditworthiness. These come with higher rates (8% to 15% APR) but offer fast funding, making them useful for fix-and-flip projects or bridge financing.

When does a HELOC on an investment property make sense?

A HELOC on an investment property works best for the following situations and needs:

• Property renovations: You can fund improvements that increase rental income or property value, especially for projects that happen in stages.
• Funding additional property down payments: Use existing equity to expand your portfolio without liquidating other investments or waiting years to save.
• Emergency reserves: Create a financial cushion for unexpected repairs, vacancies, or market downturns without tying up cash.

On the other hand, it may be wise to avoid a HELOC on your investment property in these situations:

• You’re highly leveraged: If you already carry significant debt across multiple properties, adding another payment increases your risk of financial trouble.
• Rental income is unstable: Properties with high vacancy rates, seasonal tenants, or inconsistent cash flow may not be able to support additional debt payments.
• Your credit score is low: With minimum scores typically around 700 to 720, borrowers with lower scores will face rejection or extremely high rates that may not justify the cost.

Typically, the only time I would recommend a client go the route of a HELOC with an investment property is 1) they have significant equity built up in the property 2) they need to perform some necessary renovations or repairs on the property, and 3) they have consistent rental income or the repairs are necessary to begin receiving rental income again. 

Frequently asked questions

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

Most investment property HELOCs take about two to six weeks from application to funding. Investment properties usually require more documentation than a primary residence HELOC, and some lenders also require a full appraisal, which can add time.

If your income and property documentation are straightforward and the lender moves quickly, you might close in as little as two to three weeks, but four to six weeks is a more realistic range for many borrowers.

Can I get a HELOC on multiple investment properties?

Yes, it’s possible to have HELOCs on multiple investment properties, but it depends on the lender and your overall financial profile. Lenders typically look at your debt-to-income ratio, cash reserves, rental income, and how many financed properties you already own.

Some lenders set limits on how many properties they’ll allow you to leverage at once, while others may approve multiple HELOCs if you have strong credit and enough equity across your properties.

Do all lenders offer HELOCs on investment properties?

No. Many lenders only offer HELOCs on primary residences and won’t extend them to investment properties. Because rentals are generally considered higher risk, lenders that do offer investment property HELOCs often have stricter guidelines, such as lower maximum loan-to-value limits, higher minimum credit score requirements, and more reserve requirements.

If someone is shopping for a HELOC on a rental property, it usually takes more comparison shopping than a standard HELOC.

Is the interest on an investment property HELOC tax-deductible?

Sometimes, but it depends on how the funds are used and how the property is treated for tax purposes. In general, interest may be deductible when the HELOC is used to buy, build, or substantially improve the property securing the line of credit.

If the funds are used for personal expenses or unrelated purchases, the interest typically isn’t deductible. For rental properties, HELOC interest may also be treated as a rental expense in some cases, which is why it’s smart to talk to a tax professional and keep clear records of how the funds were spent.