HELOC VS CASHOUT REFI ? (BRRRR)

[Edward Adams]

Hi BP

I have a payoff rental property that worth $230K I would like to start BRRR.

I have 2 choices 

1. get a HELOC on my rental property and start the BRRR

2.get CASH OUT refi on my rental and start the BRRRR

I believe both have pros and cons, like if I get HELOC I don't pay interest while I am looking for deal, or if I get CASH OUT refi I don't need to be worry about interest rate going up and down.

Which one you think is better in my situation?

Thanks!  

[Evan Polaski]

@Edward Adams, I prefer HELOCs.  Rates are expected to stay very low for a while, but you are correct, floating rate debt is a risk.  

Pros to HELOC:
- Typically no out of pocket cost to open (Huntington paid my appraisal and all costs)
- Interest only during term
- No interest expense while searching for deals

Pros to Refi:
- Locked in rate

In a BRRRR, where you have a fairly clear repayment plan on your HELOC, I like them better. A refi locks in your rate, but you are also amortizing the loan immediately, as well, meaning your out of pocket expense is likely to be higher on a Refi, and there is no flexibility with it.