Factoring cash out refi or HELOC into rental property
I'm looking at two options for tapping into my primary home equity in order to make the down payment for 3-5 rental properties in the next year. I'm looking to make sure I correctly account for this additional debt servicing when shopping for rentals...also looking for opinions on which one of these options is better.
Here are the rundown on numbers:
Estimated home value: $400K
Remaining mortgage: $222K
Current loan: VA @4.5%
Option 1 - Streamline refinance to reduce the rate to 2.5%, bringing my payment down. Then take out a HELOC to fund the investments and factor the HELOC monthly repayment when determining cash flow on potential properties.
Option 2 - Cash out refi at 2.25% for 90% LTV ($360K). Use that to fund new investments. I'm not 100% sure how to properly factor this into my cash flow calculations. The total monthly payment on the loan would only be $100 higher than what I have prior to the cash out refi, but it would be ~$500 higher than what it would be with the streamlined refi + HELOC. I assume the latter is the best thing to use in order to make sure I'm truly cash flow positive here?
Anything I'm missing? I'm leaning towards a HELOC if I can find one with a higher LTV. 75-80% doesn't quite get me to where I want to go for 3-5 properties.
Thanks for the advice!