Q. Should I finance an investment property with an 8% conventional mortgage or take out a home equity line of credit on my primary home at 4%?

A. Though the low rate on the line of credit is tempting, we'd urge you to take the more traditional route and finance with a conventional mortgage. Our main concern is the uncertainty in the real estate market today. In many regions, home prices are falling and we would hate to see you jeopardize your primary residence by using its equity to buy your new property. Should something go wrong, both properties could be compromised.

Going strictly by the numbers, you could take advantage of the variable-rate 4% home equity line of credit. Should those rates rise high enough to match mortgage rates -- and no one knows when that might be -- you could refinance into a fixed-rate mortgage. But "the numbers" don't know what the market is like, so we still say a fixed-rate conventional loan is your safest bet in the long run.

It's best to treat the investment property as a separate entity that can stand on its own. That means knowing the rental market in your area so you can collect enough rent to cover your principal and interest plus taxes, insurance and any association dues that might apply. You also have to build in funds for maintenance, repairs and a major problem somewhere along the line. And it would be nice if you could add in a little profit for your trouble. Right now, you can't count on appreciation alone to make this a profitable undertaking.

We hope you're not trying to flip a property -- buy a rundown house, fix it up and sell it quickly at a profit. That's very hard to pull off in a market where prices are falling and there's a glut of properties going begging.