Business line of credit vs cash out refinance ?

3 Replies

I am working on my first BRRRR property. I have found a bank that has given me the option to either take out a business line of credit on 80 percent of the appraised value or refinance at 75% of the appraisal. The BOC min payment is interest only. The BOC seems like the best option, but I am not sure if I am missing anything. Any advice is appreciated.

@Jake Adams is the refinance locked in for a longer period of time? Meaning, is that something like a 25 year fixed rate with 25 year amortization?

Does the interest rate on the line of credit change monthly? Do you need to renew every year? Every other year?

It is tough to compare without all of the information.

@Jake Adams if you are using the BRRRR strategy then you will want a long term, fixed rate loan on the "R"efinance step. The reason for this is so that you can calculate your cash flow each month. If you use a Line of Credit, which will have a fluctuating rate AND a maturity date, this will hinder your ability to forcast your cashflow as well as minimizing your cash flow too. Fixed rate loans with no maturity date are the preferred loan type in the BRRRR method.

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