What would you do?

Question

I own two condos - one being used as my primary and the other which is an investment property currently rented. Both of these condos are paid off. I am being paid lumpsum by my tenant and I am out of clues as to what I should be doing with the 1.5 years of rental income that I accumulated. I am interested in buying a small single family house but don't know how to finance. Based on reading here, I sort of know that I need to take cash-out refinance and use that as a down payment for my future purchase. or do I need to use HELOC? I probably have more than I need for my down payment towards single family if i do a cash-out refi. Do I need to buy a bigger property if I have more than 20% down payment for a single family house like maybe a multi-family?

help me! do you have any other ideas?

Melissa Justice · Answer

@Vasudev Kirs,

You’re in a fantastic position - no debt on either condo, solid rental income coming in, and now a pile of cash sitting idle. That’s a great problem to have! A few thoughts to help you map out the next steps:

1. Clarify Your Goal First
Are you aiming for cash flow (monthly income)?
Long-term appreciation/equity growth?
Or building a scalable portfolio over time?

Your financing and property choice will look different depending on which matters most.

2. Cash-Out Refi vs. HELOC
Cash-Out Refinance: Gives you a lump sum upfront.
You’ll have a new mortgage payment on the condo.
Best if you want a big chunk of capital right away and plan to buy multiple properties.

HELOC:
Works like a credit line - you borrow only what you need, when you need it.
Payments are interest-only (at least initially).
Best if you’re buying one property now and want flexibility later.

Since you already have rental income and low expenses, a HELOC might be the more flexible move, especially with rates still elevated. You can pull only what you need for a down payment and keep the rest untouched.

3. Down Payment Strategy
You don’t have to put more than 20–25% down unless it makes sense for the numbers.
Extra down payment = lower loan balance = lower monthly payment, but it also ties up capital you could use for more deals.
Often, it’s better to leverage (use financing) and spread your capital across multiple properties.

4. SFR vs. Multifamily
SFR (single-family rentals): Lower maintenance, easier to manage remotely, larger pool of buyers if you ever want to sell. Great for turnkey long-term investing.

Small Multifamily: Better cash flow potential, economies of scale (one roof, multiple rents). But management and tenant turnover can be a little trickier.

Since you already have condo rental experience, a small SFR in a stable market might be the easiest next step. Once you’re comfortable, you can scale into small multifamily.

5. Other Ideas
If your condos are in appreciating areas, you could also consider a 1031 exchange down the line - selling one and rolling those gains tax-free into a bigger, cash-flowing property.

Look into turnkey SFRs in the Midwest/Southeast where $30–50K down can get you into solid cash-flowing rentals with professional management already in place.

Bottom line:
Use a HELOC for flexibility unless you want a lump sum for multiple deals (cash-out refi).
Don’t sink too much cash into one property- leverage smartly.
Consider SFRs in strong cash-flow markets first, then expand into multifamily later.

Always happy to share more on what markets are working for other investors. Best of luck!

Arman Ahmed · Answer

@Vasudev Kirs

Congrats on being in such a strong position with two condos fully paid off—that gives you a lot of flexibility. A cash-out refi or a HELOC are both common routes, it really depends on whether you want a lump sum (refi) or ongoing access to capital (HELOC). Since you’ve got more than enough for a down payment, you don’t have to buy bigger, but many investors use that leverage to scale into a small multi-family since it spreads risk across more units and can increase cash flow. I invest in the Midwest and see a lot of people use the equity from existing properties to jump into their next deal—whether that’s single-family, duplex, or small multi-family. The key is running the numbers and making sure the cash flow covers financing and reserves comfortably.

Vasudev Kirs · Answer

I appreciate your response Melissa. This is exactly the kind of input I was looking!

Greg Kasmer · Answer

@Vasudev Kirs - Looks like your next purchase is a stabilized/renovated purchase. If you have equity in your existing condo it's really up to you as far as how you want to "tap into" that equity. Let's say your condo is worth $200k - You can likely get a 75% "cash out" refinance with a mortgage or maybe up until a 80% LTV on a HELOC. You'll likely have 150k with a refinance loan or maybe 160k with a HELOC. The rate on the loan will be lower, BUT you'll be paying for the entire amount (150k) from Day 1, whereas with the HELOC you'll only pay the amount that you're actually using from the HELOC for the down payment. So, if you have 160k HELOC, but only use say 75k of that for a down payment, you'll only pay interest on the 75k. So, in my mind, it all depends if you plan on using the ALL the equity from your existing properties (in which I would say get a mortgage/loan) or only plan on using a portion of your equity from the existing properties (in which I would say HELOC would be better). Good Luck!

Caleb Brown · Answer

I think HELOC or cash out refi depends on your rate. I would run numbers with each scenarios but you can use conventional or DSCR financing to purchase another. HELOC is typically ideal for shorter term projects where you can pay it back

Allie McAlister · Answer

Hi @Vasudev Kirs

Are you looking to purchase another property that is distressed and use the BRRRR method? Or are you looking for a property that is more or less turnkey and ready for a tenant. I've seen buyer's use both HELOCs and conventional loans. I will say if you're looking to BRRRR and pull cash out in the future, a HELC is the way to go!

Best of luck!

Vasudev Kirs · Answer

Thank you all for your wonderful suggestions.

If the rental income (that I am planning to use for some portion of down payment) is in a business account under LLC, is it OK to transfer to my personal account and then invest in a new property.

Kerlous Tadres · Answer

Hey @Vasudev Kirs! I’d look at a simple cash-out refi on the rental first. From my experience, it’s the easiest way to tap that equity and lock in a fixed rate. A HELOC can work too, but rates float and can change fast. You don’t have to buy a bigger property just because you’ve got a big down payment. Find a single-family or small multi-family that pencils out with solid rent demand and room for value-add. Any extra cash can sit in reserves or go toward light upgrades to boost rent.

Matthew Thornton · Answer

Keep growing. Perception is Multi Family cash flows better than single family...not always the case.

Vasudev Kirs · Answer

Thanks Allie. I am only looking for turnkey properties as I don't have time for BRRRR. Does that change your suggestion?

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