HELOC vs. cash-out to buy future investments cash

[Andrey Y.]

What are your thoughts on this? If you wanted to pull out ~$150,000 from a free a clear property, to buy (immediately) 3-4 less expensive properties at a distance, would you opt for a cash-out refinance or a HELOC? I am sort of torn on this, but would appreciate any feedback. Thanks!

[Alexander Felice]

Originally posted by @Andrey Y.:

Originally posted by @Alexander Felice:

Originally posted by @Joe Villeneuve:

Originally posted by @Andrey Y.:

Originally posted by @Joe Villeneuve:

What are the terms and qualifications for each? The impact financially from either the HELOC or a REFI will make your decision for you in most cases.

In my case, I use both.

The cash out refi would be approx. 4.375% fixed 30 year loan. The HELOC would be around the 5.0% range. One thing I am sort of confused on, if I ended up getting a heloc and used most of the funds right away, what would happen? It looks like I would have to come up with the funds quickly as opposed to a cash-out refi where it would just be a slow and steady payback.

What are the payback terms for the HELOC?

The heloc payback terms are more than likely going to make the cash refi a better deal. My bank has HELOC payments at 1.5% of the amount advanced. Meaning cashflow goes to crap.

as JD said, use the heloc to buy the property, then refi the cash out with a 30 year fixed.

@Joe, I promise I'm really not following you around just to agree with you....

When you say 1.5%, do you mean 1.5% of the funds you use from the heloc, need to be payed every month? (Sorry for the simpleton question)

 yes. your payment would be 1.5% of the outstanding balance. So it'll change each month. It's almost always too high to keep the funds holding the property and still cashflow. It's good to use for purchases, but not for holding.

Again, that's the heloc terms my bank offers, YMMV