Cash out Refinance Vs HELOC Vs some other approach...?

[Marcello Di Gerlando]

BLUF: I have a couple of properties with equity to juggle and I'm not sure of the approach to best set me up for my next REI.

Hi all. I'm looking for folks who would like to share their experiences with this problem set. 

My REI background: I have some experience with flips, buy and holds and issuing loans. REI is a hobby I take seriously and something I do additional to my W2 career. I don't have an imminent purchase but would expect to move on my next deal within the next year.

Priorities: 1.Protect the assets (insurance, trust, holding co etc) 2. clear the debt 3. financially prepped for my next REI

Asset 1: Primary home

.Value 550K. No mortgage

.HELOC 250K 4.25% fixed interest only

.Debt 80K drawn on the HELOC (170K remaining)

Asset 2 LLC : Second home and STR

.Value 800K. No mortgage

.Debt 100K family loan

Note: The STR will come online this month and does not have income at this time. The expected gross rents will be no less than 60K in the first year. I have no additional debts to consider.

My thoughts. First put both proprieties in an LLC for asset protection.

Then clear the combined 180K debt by putting in place a fixed 30yr mortgage on the primary as well as maintain the fixed 4.25% HELOC on the primary at the same time establish a second HELOC on the STR. Terms on the second HELOC would be variable prime plus .25%.

This will leave me with 500K LOC (two HELOCs Combined) for my next REI purchase and approx 1K in debt service on my primary home.

Feel free to punch holes in my strategy and recommend another approach. How would a cash out look on one or both of the properties? why would I cash out and pay the debt service without a purchase ready to go? Is it better to establish a holding company to protect the assets?

Respectfully,

Marcello