HELOC next move? Better options?

Question

Hello all,

I am thinking about my next investment move and wanted to get some insight. I have two properties I could use for HELOC.

Property A: Cash flowing STR. Bought at 675K in 2020. Now recently appraised at 1.2M. Remaining Mortgage: 599K.

Property B: 12mo Rental: Bought at 210K. Renovations 50K. Monthly Payment 1550/mo. Currently 12mo lease $1900/mo. Hasn't been officially appraised but probably somewhere around 300K. Remaining Mortgage: 152K.

I currently have about 50K in cash.

My main thought was to find a cash flowing rental in the 150-200K mark and use my entire HELOC on property A to fund it.

My other thought was to find a flip job for faster cash.

Is there other ventures or financing ideas I should be considering? What are others doing in situations like this?

Aubrey Durham · Answer

If you're open to a quick flip, do it. Quick cash on a flip is going to 1. give you more cash to play with vs HELOC interest rates 2. give you an opportunity to 1031 exchange into your next investment.

Wale Lawal · Answer

@Jacob Bremer

A high ARV rental property can be funded using a HELOC strategy, which can be used for down payment, rehab, or cash. The strategy involves using the HELOC for a flip to generate fast cash, reinvesting profits into long-term rentals, or exploring alternative ventures like short-term rentals or partnerships. Financing options include cross-collateralization, cash-out refinance, and DSCR loans.

Good luck!

Noah Wright · Answer

I totally understand you are hesitant to touch the 3.4%, but keep in mind you can always cash-out now, expand your portfolio, and refi down later. As the saying goes "Date the rate, marry the home"

Jacob Bremer · Answer

Nice to connect! Yeah, I’d be open to this as well. Property A is at 3.4% interest right now so I don’t think I can reasonably cash out refi on this one.

Tanner Lewis · Answer

Hey Jacob - In Austin as well! Why not do a cash out refinance on one of these deals? It would be a much better rate, it would be a fixed rate (not variable), and it would amortize over 30 years (no balloon payment). Most lenders do not offer HELOCs on investment properties, so it may be difficult to find this product.

With a cash-out refinance DSCR loan, you would be pulling out about $300k out of property A, and $73k out of property B with rates in the mid 6's at the moment

Noah Wright · Answer

Hey Jacob,

Congrats on building equity in both properties—it sounds like you're in a great position to leverage your assets for future investments!

Using a HELOC on Property A to fund a rental in the $150-200K range could work well if you're focused on steady cash flow. Just ensure that the projected rental income comfortably covers the new payments, including the HELOC. In my experience, cash flow is key, especially for long-term holds, so running a detailed DSCR (Debt Service Coverage Ratio) analysis might be a good step here.

On the flip side, if you're eyeing faster returns, a flip might be more lucrative. Since you’ve already done renovations, you probably know how to manage rehab timelines and budgets. Just be sure to account for holding costs, which can add up quickly.

Another option—since you're well-positioned in Austin—could be bridge financing or hard money lending for your flip. This way, you’d preserve more of your HELOC for future deals or emergencies.

Feel free to reach out if you'd like to discuss DSCR options, or if you're thinking about hard money for any upcoming projects. I specialize in both and would be happy to help you crunch the numbers!

Best of luck with your next move!