Using a HELOC instead of refinancing on a BRRRR...

[Zach Hawrot]

After meeting with my bank, I told them I wanted to refinance my duplex after I made the proper renovations. They advised since the duplex was cheap to start at 25k that it would make better sense to take out a HELOC against the property after renovations were done. Their pitch was this:

I would have to pay 2-3k in fees to get it refinanced whereas the HELOC would be free through them and that even though the HELOC would be 2-3% higher rate, it would take years to make up for what I would pay in closing costs. And at that time I could simply do a portfolio refinance loan with all of my other properties I BRRRR'ed through HELOCs.

Besides having to find more banks since there seems to be a limit on HELOCs, can anyone steer me why this would be a good/bad strategy when compared to traditionally refinancing with closing costs attached? 

Thanks!

[Jaysen Medhurst]

@Zach Hawrot, I think this is solid advise, especially with such inexpensive properties. The rub is to plan these out so that when you finally do the blanket loan, you can get all (most) of the cash back to pay off the HELOC. HELOCs are great for long-term debt.