Sell, Rent, HELOC or Cash Out Refi?

[Nick Schultz]

Hello BP!

I bought my 1st house in August 2018 for $268k. It was a 4/1 that I converted into a 3/2 with a master suite. My latest appraisal came in at $340k just last week. I want to make a move for my 2nd property but I do not have a lot of liquid cash currently. My ideal 2nd property would be a buy and hold rental SFR or duplex/triplex. It seems like my options are:

1. rent my current house for $1800-1900 (my guess based on current market) and buy a 2nd place with low down payment loan. I got my 1st house with 0 down @ 4.875% through my credit union. Current mortgage payment is $1450

2. sell the house and use the cash for down payments on 1-2 other properties. I owe $260k on the current mortgage and I’m not quite sure how to calculate how much I’d net after closing costs, fees, and taxes. Any rules of thumb I can go by?

3. cash out refinance. Not sure this is a viable option since I just refinanced at lower interest rate to drop the monthly mortgage payment. 

4. Get approved for a HELOC and use it when I find the right deal.

I would love to hear your feedback and ideas. Thank you so much for your time!

[Allan Smith]

I would figure seven or eight percent of sale price as lost to fees and commissions Etc.

are you living in this house? Because that changes things. Selling and taking the cash means you have to start paying rent or start over again and get another house.

if you want to build wealth with rental property and you want to grow quickly rather than just parking cash from some other high-income business or job, I would recommend leveraging the equity with a refinance or HELOC.

there are pros and cons to these two. A HELOC is not secured and the bank can call it do any time they want really. At best it's renewed every one to two years probably. A refi means you get all the cash in your pocket, but you pay interest even when you don't use it on a house.helocs are more for turning deals, not for down payments. You could use it to buy a house that needs work, fix it up, refinance, and pay off the HELOC. The cool thing is you don't pay interest in between deals, so your Finance costs a really low.