Need help on Cash Out or Heloc for BRRRR Scenario
Hi All,
Would love some advice!
My Scenario:
I have 3 properties total
1st house - I have a mortgage on about 50k and I have a HELOC on it that I haven't used
2nd house - house is paid off and I own free and clear, it is worth $120k
3rd house - I just bought this house on a HELOC. For this new property, I still have to pay renovation costs. I bought the house for 55k, renovation should be 40k and AVR I would think is around 120k
I have 2 options for BRRRR:
1) Should I take out cash, put a mortgage on house #2 and pay off the money I borrowed from the HELOC that I bought the house with along with renovation costs, the total should be under 100k. The interest rate on this property would be 5.25% and $4k in closing costs. I can put it on a 15 year or 30 year loan but I'd try to pay it off in 7.5 - 8 years.
2) Should I just pay the HELOC and renovation costs which will prob also go on a HELOC with the rent money when I rent it out? The HELOC rate right now is 4.75% but it would take me 7.5-8 years to pay off using the rent money I get.
Dilemma is that
1) If I take out cash and put the house on a mortgage, I'd be paying a higher interest % than my HELOC and would have to pay close to $4k in total closing but I'd be able to write off interest on my taxes.
2) If I don't open a mortgage, I'd be paying the HELOC on my rental money for 7.5-8 years in which the HELOC rate can increase and I might be tied up with no funds to expand. Also, I won't be able to write off interest.
What would you do!? Any advice would be much appreciated!
Thanks,
Jimmy