HELOC or Cash Out Refi?

[Christopher Sarter-Soto]

Hello, everyone.

I'm a newbie looking forward to getting started and getting my first BRRRR deal. My biggest struggle right now is understanding whether to get a HELOC on my primary home or do a cash out refinance so I can get started. Can you all give me your thoughts, pros and cons?

I owe around 168k on my primary but the last appraisal about 1 year ago came in at 422k. There's a lot of equity here I can tap into, but I just need help with the options.

Thanks for the help!

Chris

[Jay Hurst]

Quote from @Christopher Sarter-Soto:

Hello, everyone.

I'm a newbie looking forward to getting started and getting my first BRRRR deal. My biggest struggle right now is understanding whether to get a HELOC on my primary home or do a cash out refinance so I can get started. Can you all give me your thoughts, pros and cons?

I owe around 168k on my primary but the last appraisal about 1 year ago came in at 422k. There's a lot of equity here I can tap into, but I just need help with the options.

Thanks for the help!

Chris

 @Christopher Sarter-Soto When you are looking to leverage any property (but especially your primary home) with a variable rate product you need to understand what your payoff plan is. In this case I assume it would be the refi portion of your planned BRRRR.

In that case you need to understand your refi options on the BRRRR before you purchase. You need to understand loan to value and seasoning requirements before you buy based on your ARV. Too many people do not think ahead and borrow 100k but can only pull out a much smaller number to pay back or have to wait longer then they expect. If/when that happens you have to account for the additional interest that the HELOC is costing you a month, and all of sudden the deal you think is so good suddenly is not as profitable as you modeled.