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Private Lending & Conventional Mortgage Advice

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Coley B.
  • Chicago, IL
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Cash Out Refinance vs HELOC for Investment Property

Coley B.
  • Chicago, IL
Posted Nov 15 2014, 09:49

What do YOU prefer - LOC or cash out refinance to pull out equity in a non-owner occupied investment property?

I have a long-term buy and hold strategy. I purchased and renovated a multi-family investment property over the last 2 years. So I want to pull out the equity to buy another property. I plan to do the same thing over and over (buy, renovate, rent, cash out, repeat). I understand the pros and cons of refi vs. LOC. I also understand the difficulty in pulling cash out. I'm simply wondering which one do YOU prefer and why (refi or LOC)?

- Looking to pull out $100-150k

- Current loan is 4% over 30 years

- Refi closing costs in Chicago are about $2k (includes appraisal)

- Wells Fargo would charge 1% on LOC loan amount plus annual fee of 0.25% (approx. $1,000 - $1,500 in closing costs plus $250-$375 annually)

I love the flexibility of the LOC and not having to pay interest until I use it. Plus since I'm simply gonna use it for a down payment on next property I would simply rinse and repeat. But with interest rates so low and my very long term buy/hold strategy should I simply refinance at a slightly higher rate (4% --> 4.5%) so I can lock in that extra cash at a low rate over the next 30 years? I'm thinking a cash out refi makes the most sense.

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