How would you handle this?

[Drew Eldridge]

I was recently posed a question and I'd love to hear your thoughts? Let's say you have a typical small portfolio with buy and hold properties that are leveraged (let's say 70% LTV) but own one property outright. And let's arbitrarily say that the fully owned property is $200k appraised value. The goal is to take cash out (we'll say $150k or 75% LTV) to then use to purchase properties using the BRRR strategy. Therefore, this cash would typically only be tied up 3-6 months (and I know some require a year or so seasoning but let's use 3-6 months) at a time and then recycled to do the same thing again.

Assuming both are options, would you:

A.  Get a mortgage for the $150k.

B.  Get a line of credit for $150k. 

Obviously both have slightly different tax consequences, affect your balance sheet differently with regard to net worth, and many more implications. But I'd love to what you'd do and if it's in line with what I suggested.