First investment property - HELOC or Cash Out

[Catherine Carey]

We hit the buy and hold lottery with our first home.  We were given our first home (my boyfriend's family home, which his father deeded over to him for zero consideration). Since then (approximately 7 weeks ago) we have spent approximately $3000 in repairs and upgrades and we estimate that we have another $1500 to go before we can rent it.  We had it appraised (because his family had considered selling it before we presented them with our idea to take it over) and it appraised at $158,000.  I'm not sure the $4500 in repairs will get us more than another $1000-2000 on that number, if anything.

While my boyfriend has spent every spare minute working on the house, I've spent all my time crunching numbers and listening to BP podcasts.  I'm so grateful for all of the information that is shared!  But I still cant quite figure out our best way to move forward.  We want a second (and hopefully third) property by the end of the year.  With less than $5000 in this deal, and being able to rent it in our area for around $1500, we are looking at a monthly cash flow of close to $900/month.  Its doubtful we'll get another family member to hand over the Deed to a property so we need to refi and get as much money out of it as we can to buy our next property.  

So the question is... HELOC or cash out? Pros and cons? Or is there a third option I haven't thought of?

Thanks in advance for any advice!!

Catherine, Baltimore MD