How to utilize a pay-off property for more investment funding?

Question

Dear BP family,

I am trying to explore options to obtain loans for further investment funding.  Since we have a property recently paid off, I am wondering what are the options out there we could use to utilize this opportunity.  Thanks

Christian Bors · Answer

You guys could do a Cash Out Refi or get a line of credit against the property.  The LOC could be in the form of a HELOC or a commercial line of credit.  Smaller banks and credit unions are more known to give LOC's on investment properties, however banks such as Santander also offer HELOCs on residential investment properties at 70% LTV.  Below are some quick tips about cash out refi vs HELOC/LOC

Cash out Pros

-tax free money

-low interest rate

-fixed monthly payments unless you choose a variable product

Cash out Cons

-closing costs (couple thousand)

HELOC/LOC Pros

-tax free

-its a line of credit, hence you can use pay back then use again

-usually NO closing costs on residential Helocs; there will be closing costs on commericial LOCs

-commericial LOC is very fast moving as far as getting funding and refinancing  (Makes it easy to rinse and repeat)

HELOC/LOC Cons

-higher interest rate

-variable rates

-monthly payments depend on amount borrowed

Hope this helps,

CB