Rental Property Investor · Somerset, MA · Member since 2018 · 19 posts · 3 votes
Looking to use the equity in our 7 unit to build our portfolio. We own it free and clear. It’s located near Bangor Maine. I believe it’s worth between 250-300K. Looking to get between 150-200K.
Would it be better to get a line of credit or cash out refi?
Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Aaron Sardinha Probably depends on what your goal is. I'd go line of credit if I just needed quick, temporary access to funds in order to buy value add properties with the intent of fixing them up and refinancing them with longer term debt (BRRRR).
If you're looking for pull the cash out and keep it out, either to invest in more turnkey properties or finally grab that Lamborghini you always wanted, I'd do a full cash out refi.
Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Aaron Sardinha Probably depends on what your goal is. I'd go line of credit if I just needed quick, temporary access to funds in order to buy value add properties with the intent of fixing them up and refinancing them with longer term debt (BRRRR).
If you're looking for pull the cash out and keep it out, either to invest in more turnkey properties or finally grab that Lamborghini you always wanted, I'd do a full cash out refi.
Rental Property Investor · Somerset, MA · Member since 2018 · 19 posts · 3 votes
7y
@Ryan Murdock we’re looking for down payment money on long term buy and holds, which has been our model so far. We are also looking to get into some single family flips in Maine, where property is cheap.
It sounds like you’re saying line of credit is better for the short term.
Lender · Salt Lake City, UT · Member since 2017 · 77 posts · 76 votes
7y
It doesn't matter what you need it for, it's the same result. Money in exchange for equity, HELOC is generally easier to get, it's like a credit card, use it as you wish or draw on it as needed. Cash-out is wire transfer or a check written out to you based on your equity. It's the same thing. Do you care whether it's on a card or in your account? Me either.
The difference is the cost of the loan and the terms.
HELOC is cheaper in my area. Home Equity Loan or Home Equity Line of
Credit. They can be fixed rate or variable, if you don't spend any of the funds, then you don't have a monthly payment, so they are advantageous to having access to the funds and not making a monthly payment while you shop for the flip.
Cash-out refi is a fixed rate with terms.
It's a fixed payment and you can foresee what you will be paying every month. 10 year, 15 year or even 30 year terms.
HELOC is generally a variable rate which means the payment can fluctuate, but also on the plus side is you can get an introductory rate, much like a credit card and choose interest only payments. We offer 10 years of interest only payments which is good for a BRRRR to keep the payments low in order to stabilize the property, but of course the payments will go up as will the rate generally.
Start calling banks and credit unions and ask, " what are your terms for a HELOC? Are you currently offering an INTRODUCTORY rate?"
And then, "what are your terms for a cash-out refi?". Write it down and do some math.
Be honest with them and tell them what you are doing. But don't say the word FLIP!
Say investment property that may need some repairs so you can get it rent ready.
Rental Property Investor · Somerset, MA · Member since 2018 · 19 posts · 3 votes
6y
Hey guys, so we tried through a couple of banks and had some different results. Some of them said no due to how rural the area is, others said they dont do LOC for acquiring more investment property. We Landed at the local TD bank which said they could give us an immediate interest only, unsecured LOC equaling 25% of the gross income stated on the last tax return of the LLC, which we closed on last week. They also began the process of geting us a commercial equity loan on the property. The whole virus thing has slowed things down considerably but after a year of trying different banks we have finally had a breakthrough.
I appreciate everyones advise and help with this question. Thank you Bigger Pockets community!