Which HELOC Terms would you pick? Why? Or REFI?

Question

One of my properties was recently paid off.  I plan on putting a HELOC on it to BRRRR some properties with.

Which terms would you pick an why?

Term

12 Month Intro Rate APR* "As Low As"

Thereafter APR* "As Low As"

Principal-and-Interest Option7 year draw / 7 year repayment period

1.99%

3.00%

Interest-Only Option10 year draw / 10 year repayment period

3.75%

Or would you just do a cash our Refi and use the cash?

Why I am choosing a HELOC.

Property is worth about $300,000.  Rent is $1700.  The property is in Miami, so taxes and insurance are high.  Cash flow after everything without a mortgage is about $1000, $800 if your ultra conservative.  I feel it is better to have access to a higher amount of cash via HELOC, and have a temporary high payment while a BRRRR is going on.  The cashflow can cover most if not all of the payment for the HELOC while the BRRRR is going on.

I think I am leaning to the 10 year term for the lowest payments possible.  Pay off the balance when the BRRRR is complete.

The alternative is to cash out refi, but will be less then what I feel I can tap with a HELOC, then also using all the cashflow taken for the long term.

Thanks BP!!

Josh Walker · Answer

Hey Ryan.  I would definitely go with the HELOC and likely the 10 year.  Although there is a case to be made for the 7 year since the first year is lower interest on that one and that should still be plenty of time to come up with an option before the 7 year term is up.  Even if you are still carrying a balance you can always refinance the HELOC into a new HELOC.  I posted a blog not long ago on this kind of thing that you may find interesting (link below).  I love figuring out how to hack these things ... win the game of money. I wish you luck!

https://www.biggerpockets.com/...

Ryan Planchon · Answer

@Carlos Rovira  Thanks!  I see your local.  Let's talk.

Carlos Rovira · Answer

@Ryan Planchon I always prefer HELOCs because they are more flexible. You have the option to keep debt service low by paying interest only if you need it. A cash out refi will be amortized and lock you in to paying P&I.

Term	12 Month Intro Rate APR* "As Low As"	Thereafter APR* "As Low As"
Principal-and-Interest Option 7 year draw / 7 year repayment period	1.99%	3.00%
Interest-Only Option 10 year draw / 10 year repayment period	3.75%	3.75%