HELOC VS Selling in AZ market

[Zack Aboona]

Greeting BP,

My wife own a house in Waddell, Arizona, owe $165,000 and current house market value is approx $300,000. We are looking into buying a second house where we see ourselves live in it (move from Chicago within a 2 - 3 years) and planning on renting in the mean time. So we are looking in area closer to Phoenix with a pool, approx value of $550,000 for the new house.  

My wife wants to sell the Waddell house and buy the new one, and I been discussing with her the option of getting HECLOC and renting the house. Based on our discussion with our realtor , with the rent we can get a cash flow of approx $400. So keep this house and with the equity loan get the house we like and rented out also. Ideally to have the two houses rented out and build up equity , or maybe create a cash flow depending on the rent, loan ....etc. I have not done much research on the HELOC and the interest rates.

We did minor remodel on the Waddell house, replace carpet with tiles, paint, bathroom work...etc so it is not currently vacant, having said that we do have savings of approx six months if in the near future we have two houses with no vacancy. 

Hope I outline the important information, probably missed a detail, I wanted to get BP feedback or thoughts on what is the pros and cons of each approach. I do not believe Arizona has seen much Covid-19 impact and I don't see big real estate impact but than again who knows! 

Thank you for your feedback in advance , be safe and healthy.