Need Help: Sell, Hold, or HELOC?

[Matt Gerald]

Hi, I’m new to the forum and would like to request a little help or feedback. I recently purchased a larger home and put a significant amount down such that it depleted my cash reserves that I like to keep around to fund investments that come along.

I have a few rentals and am thinking about selling one to replenish my reserves. The one in question is a townhome, 2BR/2.5BA, 3.25% interest rate, healthy cash flow, prime location to town, and significantly benefited from recent home price appreciation in my area. It has almost as much equity as my current primary residence which I plan to convert to another rental.

My options are:

1. Don’t sell the townhome, keep it, let it cash flow, keep raising rent, build back my reserves over time

2. Sell the townhome, cash out while prices are high and replenish my cash reserves for investments if economy downturns

3. Put a HELOC on the rental and use it to tap a portion of the equity if/when needed to fund an investment

I lean toward #2 or #3. #3 is intriguing because I get the benefits of #1 and the option to a portion of the benefits of #2, but is it even a good idea given the ability of a bank to call or curtail the HELOC, probably both around the time I would want to use it?

I am loath to lose the townhome’s cash flow and interest rate, but my opinion is that I bought a new home at a disadvantageous time price-wise and so selling an asset at the same time nets out that impact. But is it foolish? Would holding on to a good cash flowing property be better than cashing out now while prices are high?

I welcome your feedback and thanks for your consideration.