Refinance vs. Holding & HELOC

[Tucker Cummings]

I've just purchased my first property in cash, with the goal of doing a BRRRR strategy. However, I haven't borrowed any money for the property, so I'm not obligated to pay anyone back (other than myself), and I'm wondering if a better strategy might be to open up a HELOC on the property. Despite the cash purchase, I'll still have plenty of reserves in case of emergencies.

I'm thinking the Pros of a HELOC would be that I could use that for buying power of other property, while still maintaining strong cash flow when the HELOC is not in use, and I could have a more stabilized portfolio. The cons would be just not having that cash ready to deploy and my ROI would much, much less.

The Pros of a cash out refi would be having that money ready to deploy (but maybe this point is null if I have a HELOC to deploy) and my ROI would be way up. The major con of a cash out refi is that I have a mandatory payment for 30 years. Cash flow with a mortgage would be about $500, cash flow free and clear would be about $950.

P.S. To avoid the "it depends on your goal" answers - my goal is financial freedom (defined as covering my expenses) with cash flowing real estate in the next 5 years. I have one property already and my wife and live on just her salary, so we pocket about 60k/year after taxes.