Hi, I need some help in figuring out what my best course of action will be , given the following situation..... I am looking to Get the Equity out of my Primary come the first of July ( about 3 - 4 weeks from now ). I have right at $40,000 of Equity in the property. A Lender told me that I can get up to 100% of the Equity out of the house via a VA loan So given the 100% of Equity with a VA loan Refi . , would a HELOC even be something I should consider ? Here is what my goal is, with the use of the $40,000 of Equity : I am looking to purchase a property for around $45,000 + $5,000 ( for two sets of Closing as well as the Appraisal ) = $50,000 Loan I'll get from the Lender $10,000 Down Payment ( 20% of the $50,000 loan ) + $25,000 in Rehab costs = $35,000 ..... Which I'd get the money to pay for this $35,000 via the cash I get ( $40,000 ) from the Refi. or HELOC . This assumes the ARV comes in at $100,000 ( although likely $110,000 ), with an LTV for a Loan on the next Investment/Rental property being 75% = $75,000 So $75,000 from the LTV - $50,000 ( the amount my Loan will be from the Lender ) = $25,000 to use on the next Investment/Rental property purchase .... Wash, rinse, repeat Thanks so much for any and all help

Jason Chambers and John Whittle, thank you both for your replies. The ARV of what the house will be worth once it's renovated. The property needs about $25,000 in repairs, of which I do not have , as well as butting 15% - 20% down on a $50,000 Purchase Price for JUST the Property. So $50,000 for the Property , $25,000 for the repairs, $5,000 ( for 2 sets of closing ) = $80,000 my All-In The ARV should come in at $110,000 ..... My primary is in the exact same neighborhood ( and I did a FULL Renovation on it last year ) as is this Investment property I am looking to purchase, and mine appraised for $108,000 with very similar comparables , except this other Property is on a Lake .... so this " Should " increase the vale a bit , so I'm assuming it comes in around $110,000 ARV At $110,000 ARV , and a Purchase Price of all-in costs at $80,000 .... I'll be close to Purchasing it at 30% Below Market Value I just don't have the available Cash to Pay for the $25,000 in Repairs + the " Likely " $10,000 down Payment , and this is why I;'m looking at / leaning towards doing a Cash-Out refi. of the Equity in My Primary . Properties Like this don't come around often in my area, so i want to pounce on it while I can, and with doing a VA Loan refi. , I feel like this would be a wise decision to make, to get the funds necessary for the Repairs and the Down Payment

Have you talked to any lenders yet? Cash out refis can be kind of tough from what I hear, it being a VA loan might make it even more difficult. When you say ARV do you mean current value or are you using it correctly in that the repairs aren't done yet? If the house needs work a cash out refi will not work. You have to go thru an appraisal and you will only be able to borrow what the appraiser says the house is worth.

@Michael Dunn it makes sense. If you go into the new property with enough existing equity to cover the closing costs between the two properties AND make positive cash flow then it could be a good buy. If you run the numbers and it's a property that works for you, you could always come back later with a HELOC and eliminate most of the compound interest on both properties while continuing to invest. I don't know if you've done any VA financing but remember to take into account the VA funding fees and any other VA origination fees your agent, bank, or title company might tack on. VA funding requires a ton of paperwork and extra time. Be aware of additional fees. What you said earlier is the key to all of this discussion...don't max out your borrowing/leverage ability. Spread yourself too thin and things could unravel quickly. I try to keep the emotion of buying out of it and run the numbers. If they make sense, they make sense. If not, there's always another one.

Jason Chambers, Great insight into the possible 2 scenarios I am looking at. I am ( and have already calculated it into my overall TOTAL out of pocket expenses ) for the purchase of this Investment property, and that is ...... $2,500 " Per " closing cost. So 1 set of closing costs is for the Refi. on my primary, and the other set of closing costs is when I go to Refi. on the Investment property ( at 75% LTV ) I need the access to the upper part of $35,000 to purchase ( down Payment ) and Rehab + the two sets of Closing Costs on this Investment property. I'm estimating the Down Payment at $10,000 ( 20% on $50,000 purchase price for the property ) , although my Lender did say that I could do 15% down .... I'm assuming PMI would then be tacked on though .... I'll have to run the numbers on the comparison of 15% vs 20% Rehab costs of $25,000 And add in $2,500 for each of the 2 closing costs ( so $5,000 total ), and I'm right there at the TOTAL amount needed of $40,000 to get this property. I have just over $40,000 of Equity in my Primary . And with the option to use my VA loan for a VA refi. , I was told I can get 100% of the Equity out I don't want to Max out my Borrowing/Leverage , but if the numbers are coming out right , and I get this property at 30% Below Market value when it's all said in done, I am assuming taking out the Full amount of Equity from my Primary " Makes Sense " ? Jason Chambers

HELOC vs a Cash-Out refi .... Pros and Cons of each ??

Brent Coombs

Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes

HELOC vs a Cash-Out refi .... Pros and Cons of each ??

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Brent Coombs