Construction Loan vs. Home Equity Line of Credit

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​My partners and I purchased a 2 flat a few years back and to say we were strapped for cash is an understatement. That being said, we managed to renovate the 2nd apartment unit, clean up the first floor, and duplex down to the basement to add a bedroom and bathroom.

We still have a fair amount of work to do. We need update the siding, build a garage, replace the windows, and update the 1st floor kitchen and bath.

Here are the stats:

Construction costs - $50,000
Purchase Price - $225,000
Current Appraisal Value - $375,000
Post Construction AV - $440,000
Current Loan Amount - 195,000
Rental Income - $2,800
Mortgage + Taxes + Insurance - $1650
Liquid Cash - $10,000

My partners and I want to get the remaining projects off our plate and are trying to figure out the best way to make it happen. Our intention is to refinance after the project, pay off our loan and pull out some equity for our next project.

Here is our question, in our specific situation, what is the most efficient way to leverage our equity to complete the project? We are exploring a construction Loan and home equity line of credit.

Looking forward to your comments.

Construction loan offers you protection in the sense that vs a HELOC, a default won't result in the loss of your residence. The downside is that it is a one-time thing vs the revolving credit line that a HELOC is. If you plan to do more projects in the future and don't want to keep taking credit hits and providing paperwork, and you are very confident that your numbers work, then a HELOC may be more suitable for long-term investing for multiple properties..