Equity Loan, HELOC or cash out?

[Angel Miranda]

Hello BP, new member here. I'm looking to start my Real estate investment portfolio, but I'm a bit conflicted on how to get it going. I have a good amount of equity built-up on my home right now, but I'm a little hesitant to cash it out due to high interest rate at this moment. I'm locked-in to a 2.25% and a very good and affordable mortgage payment. I'm looking for a BRRRR property and I probably have enough money for down payment; however, I will not have enough for the repairs. I'm leaning more towards a HELOC what are your thoughts?

[Jay Hurst]

Quote from @Angel Miranda:

Hello BP, new member here. I'm looking to start my Real estate investment portfolio, but I'm a bit conflicted on how to get it going. I have a good amount of equity built-up on my home right now, but I'm a little hesitant to cash it out due to high interest rate at this moment. I'm locked-in to a 2.25% and a very good and affordable mortgage payment. I'm looking for a BRRRR property and I probably have enough money for down payment; however, I will not have enough for the repairs. I'm leaning more towards a HELOC what are your thoughts?

@Angel Miranda HELOC's are very useful but only if you have a plan to pay the HELOC back in full. HELOC's are vehicles for short term financing needs, where fixed rates are for long term needs. HELOC's currently are going to be 8.5% to 10% as they are based on prime which will be at 8.5% after the next fed meeting this week. So, not a big deal if you pay that for 6 months for example but paying that for multiple years will bring down the return for what ever you are using the funds for.

When utilizing the BRRRR strategy one of the R's of course stands for refinance. So, if you use a HELOC funds to in part to rehab the next property you would want to make sure you would be able to extract enough equity from the project to pay back the HELOC.