HELOC or Cash Out Refinance?

[Jacob Haskins]

Hello BP'ers!

I am looking for some advice on my first investment. I am a real estate agent/investor in the Northwest Arkansas area, and back in July, I bought a SFH with plans to rehab and then later move out and rent it. I live in this home and originally planned to house hack, however life events happened and I had to pivot. I have currently passed the 6 month mark, so I am exploring options of either cash-out refinance or HELOC. I pay a pretty penny for PMI, and I thought it might be a good idea to pull cash out and start looking for another deal and take advantage of the equity since I extensively remodeled the home. Below are some of the investment details:

3 bed- 2ba, 1430 SQFT.  Purchase price $137k (around $95 PSF). Rehab $25k (my own money).

3.5% down CONV at 2.75% over 30 years. Mortgage payment is about $780 including PMI.

Several houses around me have sold recently from anywhere in the $130-175PSF range. A particular house on my street sold for $175 PSF about 3 months ago. It is a 3bed/2ba home as well (around 1350 sq ft) and a very good comparable in my opinion. My home is a little nicer with the rehab, but does not have a new roof or fenced in backyard like the other home. With this being said, I think my home is worth around $170ish PSF, but of course it all comes down to what an appraiser thinks. I would assume I could get 80% LTV on a cash out refi, and at $150-$170 PSF, I could easily recoup all of my rehab cash. However, I don't like the idea of being stuck in this house for another year if I cash out refi based on the primary residence loan requirements because I would like to be able to use that cash for another REI. I have a duplex house-hack in mind for my next venture.

What are you opinions/suggestions, Cash out refi or HELOC? Maybe I should consider something else?

[Ryan Blackstone]

Your loan is freaking amazing! Your loan may require you to live in the home for a year so it seems like you have 6 more months. If that is the case, then I would do a heloc if you have a deal on the hook. I wouldn't refinance and then be stuck living there if you want to grow. HELOC and FHA loan on a house-hack duplex will let you scale up fast. The banks hit me with having to bring 15% down on my second deal, because the properties weren't 50 miles away. I would check your lender that they wont ding you for getting another personal loan. However, it seems like you have enough equity to maybe put 20% down on your next deal. No matter how wrong it is, I have been seeing lenders use the zestimate as the value of your house for a HELOC without getting an official appraisal.