Pros and Cons of HELOC vs Conventional in specific scenario

[Jeremiah Lee]

-What are the pro's and con's in using a HELOC vs Conventional loan on this long term rental?

-What are the risks in buying with the HELOC in the scenario below?

-Is it challenging to find a lender that would allow a cash out refinance in this situation? 

Appraised Value: $140,000

Purchased Price: $115,000

Rent per month: $1,150

Location: TN

Property Mgmt: 10%

Option A:

Purchase with a $120,000 HELOC, with a 6% interest rate, hoping to cash-out re-finance

Option B:

Put down 20% with a conventional loan at 5% interest rate.