Cash out Refi vs HELOC
As I'm learning and trying to find ways to fund my next deal, I've read David Greene's Book on BRRRR and had a few questions.
1. What's the better option for funding a deal, using the cash out refi or a heloc on the property?
2. How do you some of you choose which option to go with?
3. Is one option better than the other? Or preferred?
#4 All Forums Contributor
- Plymouth, MI
Numbers, with $$$$ in front. What are they? You can't answer your questions without them. Every deal/property is different and will have a different answer...including a third one, which is usually the best one.
Joe said it better than I could. But if its personal preference its cash out refi, for me. One big reason is to keep some distinction of what funds belong where as I scale. A deal goes south, and then you've leveraged two assets instead of just the one, with a HELOC…yes that can happen…with a cash out refi, you technically can take the cash to go to the beach if you want and have enough left over. As long as that one loan is being paid down by someone else (the tenant) it's all good.
Also, while many have posted as of late the readiness of HELOC's from certain lenders on investment properties, in my area they are not readily available. SO my preference is in part jaded by lack of experience in HELOC - but I have done refi's and they are clean and simple.
Good luck!
1. Cash out has high closing costs, HELOC has small closing costs but adjustable rates. Third option that Joe mentions is selling, which also has transaction and tax costs.
2. Do I want to keep the house? Cost of the money. Ease of the money.
3. Better or worse than what? Cost benefit analysis.