Pay Down Heloc or hold onto cash?

[Tyler Bettencourt]

What should I do? I have a $100k heloc. In August i bought a rental property for $45k. (its performing well) Currently there is a balance of $40k against my heloc. I am planning to scale and to possibly buy 2 more properties in 2021. (2 properties for 100K or less). I am sitting on about $27k of my own cash. I really like the idea of putting that $27k towards the principal of my heloc to try to pay it off to start fresh again with $100k. However, I am nervous because it is not like I make a lot of $$ and will have $27k again in a few months. I always hear that it's best to hold on cash and to leverage your assets which i did with getting a heloc but I do want to pay it off to leverage it again in 2021. Is this the right move? I would love to hear of all your strategies. 

[Joe Splitrock]

@Tyler Bettencourt I am in a similar situation. We purchased in September using our HELOC. We have been paying interest only on the HELOC since we closed and letting cash accumulate. We are going to refinance on of our existing rentals and take cash out to pay off the HELOC. Basically that will roll two properties into one loan at 2.75%. The HELOC will be paid off and ready for the next deal without us using our cash to pay it off.

Part of the answer for you depends on these two questions:

1. What is the interest rate of your HELOC? What return are you getting on your cash? Comparing the two tells you how much you are "paying" for that cash sitting in your account.

2. For the purposes of investing, does it matter if you use cash or you get cash from your HELOC? If it doesn't matter, might as well pay off the HELOC and save some interest while you wait.