Use a HELOC for a buy and hold, decent shape duplex in Colorado?

[Cameron K.]

Good Afternoon!

I will be closing on a duplex this Friday. We opened a HELOC on another rental property (a 4-plex) with 800k in equity. The HELOC is for 190k. I will be using 90k from the HELOC to put down on the duplex. Duplex is in good shape, brick exterior, good location, and could use some attention on the inside. It's not what I would call a BRRRR, since it doesn't need a ton of rehabbing, mostly finishes inside.

Here's the question: How should I use this HELOC in the best way to acquire more rental properties? With this duplex, I don't know if there's enough rehabbing to bump the appraisal to get back our HELOC amount and cash out. Considering 3 options:

1) Turn around and put the duplex on the market for 100k (we got a good deal on it - and the Denver market is inflated. I think it will sell.)

2) Hold on to the property for a few months and use the other part of the HELOC to rehab it on the inside. Then try to sell at a premium.

3) Hold onto it long term and put a corporate renter in one side, and a long term tenant in the other to maximize cash flow.

I suppose there are two questions there.

What's the best way to use a HELOC in this situation?

What would you do with a duplex in a good area of Denver? 

Thanks!

[Chris Lopez]

@Cameron K. I disagree that the Denver market is over-inflated. 

1. More people are moving here vs leaving.
2. There is way more demand than supply. Inventory is very low. A market the size of Denver is roughly balanced at 15,000 - 18,000 ish properties. We're at about a 1/3 of that. See chart below.
3. Builders have not kept with demand. There is a shortage.
4. Home owners are remodeling vs selling and trading up because there is nothing for them to buy.

A lot of data points to Denver staying strong. Pull out money and buy more properties.