Investment property lenders generally want 20% to 25% down, and they want it seasoned, meaning it has been in your account long enough to look like yours. A HELOC draw can supply it. The draw shows up as cash, the underwriter will ask where it came from, and you'll disclose it, because the new debt service counts against your ratios whether you disclose it or not.
Run the deal with the line of credit payment included. A $75,000 draw at 8.5% is about $531 a month in interest alone during the draw period. If the property's cash flow after mortgage, taxes, insurance, vacancy, and maintenance is $400, the deal doesn't work yet. It works when rents rise or when the balance comes down, and until then you're subsidizing it out of household income.
The payback plan is the whole deal. Three that actually function: the property's cash flow pays the line of credit down over four or five years, your W-2 surplus pays it down while the rental covers itself, or you refinance the property once there's enough equity and clear the balance with the proceeds. That third one depends on rates and appraised values two years from now, so don't build the plan around it alone.
Tax treatment follows the use of the money rather than the collateral. Interest on a HELOC used to buy a rental is generally traced to the investment activity instead of to your home, which puts it in a different place on the return than mortgage interest. That tracing has to be documented and it needs a CPA. I'm an insurance broker, and this is the kind of detail that costs real money when it's handled after the fact instead of before.
Risk stacking is what to be careful about here. Your house secures the line of credit. The line of credit funds the down payment. The rental carries a mortgage. One vacancy doesn't break that. A vacancy plus a roof plus a rate reset might. Keep enough available room that you can absorb four months of no rent without borrowing anywhere new.
Some lenders won't count HELOC-sourced funds as an acceptable down payment source at all, especially on conventional investment loans. Ask before you draw. It's a five-minute question that saves you interest on money you can't use.
An alternative to price out: a policy loan against cash value, if you have a funded policy. It doesn't report to credit bureaus, it doesn't need approval, and it doesn't add a payment your rental underwriter can see. That last part isn't a loophole, it's just how the underwriting treats it, and it changes what you qualify for.