Best Practice to Pull Money Out of a Paid-Off Rental??

[Grant Young]

I own a duplex and have it paid off no mortgage. It is valued at 250k. I would like to take cash out to buy another rental. What is the best practice to pull money out of a paid-off rental, in efforts to buy another rental??

a. Cashout Refinance? 

b.HELOC?

or c. Line of Credit? 

I am at the investigating stage and learning about the options. I appreciate any advice anyone can spare! 

G

[Evan Polaski]

@Grant Young do you have another property in mind?  If so, and the timing works out a cashout refi will be your cheapest debt, and most secure.  

I am a fan of HELOCs, and have never had my line reduced even in the recession.  This option is typically no cost up front and provides flexibility in timing.  But as others pointed out in response to another one of my posts, I forgot to mention that banks do hold the right to close or reduce this line at their discretion if they feel the underlying asset value has dropped.  So there is risk associated here, but you don't pay for what you don't use.

Line of Credit, as in a personal line of credit?  Typically these come with much higher interest rates and generally lower amounts, since you and your credit score are the only underlying collateral.

Again, if you have something in mind, and the timing works out, a cash out refi is likely your safest and cheapest option, but once you get it, you start owing on it whether or not another deal comes to fruition.