HELOC vs. Cash Out Refi

[Rob Wetzel]

I recently renovated and rented my first row house in Washington, DC. The deal performed well and I'm curious if ya'll think I made the right decision when it comes to HELOC vs. Cash Out Refinance. I'm new to the finance part of real estate, so I'm curious if any experts here would have done something differently. Thank you!

Purchase Price: $660k, Downpayment (10%) + Cost to Renovate: ~110k, Appraisal: $900k. Here are your two options:

1) Traditional refinance (no cash out). Monthly payments go from $3,820 to $2,725 at an interest rate of 2.8ish%. For the next deal, I can use HELOC from a state credit union up to 265k. A 100k HELCO is 3.25%, 150k is 3.5%, 265k is 4.5%. HELOC is tied to the prime rate - so the risk is it's variable rate.

2) Cash out refinance at 75%. Interest rate on the new mortgage is 3.625%. My monthly payment goes to $3080 and I can pull out 85k tax free.

I ended up choosing option number 1 and I'm currently getting 3500/month w/tenants while keeping one room for myself. In a perfect world, the long term goal is to keep replicating this strategy. Happy to answer any questions, excited to learn about this forum and send my first post!