Cash Out Refi or HELOC

9 Replies

Own rental properties outright and am looking to add to our portfolio. Would you do a cash-out refi or a HELOC to finance our future property purchases? Why?

I recently faced the same question with a couple properties I own free and clear. I decided in favor of the HELOC because it gives me more flexibility where I'm only paying for what I use. I didn't want to do a cash out refi and then let the cash sit while I found deals. With a HELOC, I can have the flexibility to make cash offers on anything I find and then refi back into the new property and pay of the HELOC, keeping it open for future deals. I can keep the HELOC open as revolving cash credit and use it for several years. There are benefits to both methods. Awesome job in getting free and clear properties - I think that's the win here. Cash out vs HELOC - both are going to use your equity to get more properties = success! :)

Originally posted by @Richard Queen :

I recently faced the same question with a couple properties I own free and clear. I decided in favor of the HELOC because it gives me more flexibility where I'm only paying for what I use. I didn't want to do a cash out refi and then let the cash sit while I found deals. With a HELOC, I can have the flexibility to make cash offers on anything I find and then refi back into the new property and pay of the HELOC, keeping it open for future deals. I can keep the HELOC open as revolving cash credit and use it for several years. There are benefits to both methods. Awesome job in getting free and clear properties - I think that's the win here. Cash out vs HELOC - both are going to use your equity to get more properties = success! :)

Thanks very much for the your advice. I was leaning toward a cash-out refi but I am now favoring a HELOC for the flexibility as you mention. What interest rates are you getting for the HELOC?

 

I would take a look at your interest rate and the rent to value. Might be a good time to lower your current interest rate (depending on when you bought the property). The numbers still need to make sense for a REFI. HELOCs are great too though. I look at both because they are better in different situations.  

Originally posted by @Frank Geiger :

I would take a look at your interest rate and the rent to value. Might be a good time to lower your current interest rate (depending on when you bought the property). The numbers still need to make sense for a REFI. HELOCs are great too though. I look at both because they are better in different situations.  

Hi Frank! We purchased the homes with cash, so we do not have any loans on them. We are looking at the best option to purchase the next properties whether doing a cash-out refi or HELOC would work best. Thanks for your comments.

@AJ Hu I'm working with Huntington Bank in my local market which has a private bank inside of it. It's been a great way for me to get a little more flexibility than most banks offer. I also have a mortgage broker that I work with who can check rates of multiple lenders and I use that when needed as well. The key is to make many phone calls in the beginning and then pick a couple to build a relationship with because the more they know about you, the more flexible they can be.

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