Need help deciding which payment method to use to buy first STR

[Sara A Bajuyo]

Hi all,

Need some wisdom. We have a house we want to purchase for a STR that comes in at $170,000. I am approved for a DSCR loan with 20% down and 8% interest. (I am independent contractor for less than 2 yrs, so conventional loan isn't possible.) The loan has a prepayment penalty for 3 yrs: 3% the first year, 2% the second year, 1% the third year. OR, would you do a cash option and pay using a HELOC on our primary residence? We don't have a lot of upfront capital, so the downside to the HELOC is that we are limiting funding for upgrades and such. It's our intent to do some limited upgrades to force appreciation and then pull out some equity after a few months for other possible investments. Thoughts on which would be a better way to go? Thanks in advance!