Cash-out Refi vs HELOC

[Geoff Nielson]

Last November, I purchased a rental property.  The house sits on 2 city lots.  I am very interested in building a new home as a rental on the empty second lot.  I've got a builder lined up and now I'm just working through the best way to fund the project.

I have a significant amount of equity tied up in my personal home.  I see two options to use that as a source of funding:

1. Do a HELOC and use my personal home equity to build the new property, or

2.  Do a cash-out refi and use my personal home equity to build the new property

For simplicity sake, let's just assume that I can get either type of loan for the same amount of money and it will cover the total cost of building the new rental property.