Refinance or HELOC for starting capital

[Mahab Hoque]

I was lucky enough to buy multi family unit in NYC market around 2013 for about 550K 3.5% interest with FHA loan. I have been living in one of the unit and renting out other 2 units which covers the mortgage and I’m just paying utilities, heat and water bill out of pocket. I would like to finance few more rental properties and would love to take advantage of BRRRR strategy. This property built up some equity, around 150K. I’m confused between getting HELOC or cash out refinance to invest on the next property. Any suggestions? NYC market is really expensive for newbie like me, any rental investor from NJ? Would be nice to get some insight.

[Basit Siddiqi]

@Mahab Hoque

I would take a HELOC in your scenario.

You have an amazing rate at 3.5%; if you do a refinance; you are looking at a rate around 4.5.
If you do a HELOC - you keep the 3.5% rate on your original loan amount.

The overall costs will also likely be less. The only situation you may run into is being able to take out a HELOC on the full amount of equity.