HELOC vs. Cash Out Refi on First House Hack

[Lauren C.]

Hi All!

I know this topic has come up before but I read most of the past forums and those asking the question are either asking about a property they paid cash for or used hard money to acquire it. I'm in a slightly different boat.

I recently purchased my first duplex. It will be owner occupied for 1 year until I buy and relocate into another small multi. We've put a lot of money and work into rehabbing the units and I would like to free up some cash for the next deal as well as pay off a credit card we used to assist with rehab. (New card with 0% APR for another 10 months)

Here are the numbers:

Purchase Price- $117,000

Down Payment- 20%

Current Mortgage Rate- 4.875

Rehab Costs- $50,000

- We did A LOT of the work ourselves and while we haven't had it appraised yet, our realtor is confident it will appraise for at least $190,000.

I called a bunch of banks and the best rate I can find for a cash out refi is 4.2.  Lower than my current rate! In order to make the deal "work" in terms of cash flow, I would only plan on cashing out about 30k. 

So here's my dilemma that I'm sure others have.

Do I do the cash out refi, pay a few thousand in closing costs, get a lower rate, but increase the mortgage payment thus decreasing cash flow a bit. (I'd be right at $100 a door after the refi. This accounts for all expenses, repairs, vacancy, capex. I'm very conservative in my numbers for reserves.) Also, are the closing costs worth only pulling out 30k?

or

Do a HELOC which people seem to love as they can borrow and pay it back at often as they like?

Pros- No closing costs. Lower interest rate on the cash only when I use it. 

Cons- According to the banks, the HELOC rate is only locked in for 5 years and then can increase up to over 5-6% and I heard stories of HELOCs being called back with not much notice.

Overall, my goal is to pull 30-35k to pay off a credit card and use as a down payment for the next small multi.

What do you guys think?

Side question- Can I do a cash out refi AND a HELOC afterwards on the same property? Can I do both?

Thanks in advance for reading this whole thing and any advice!