After BRRRR, HELOC or Refinance?

[Alex Thibau]

Hey Folks,

I'm sure this topic has been covered hundreds of times, but please bear with me. Here is my situation: I've finished a BRRRR investment property which is now worth about $230k. I'm trying to figure out whether it's more beneficial to get a HELOC on this property or get a cash-out refinance mortgage.

I'm attracted to the HELOC because of the flexibility to pay down the balance and save on interest when I have cash to spare, and then draw it back out when I need to use. The only downside I see is not being able to take advantage of the tax deductions from interest as one would with a standard mortgage (for the purposes of this discussion let's assume I am using the money for something other than real estate, therefore no tax deduction possible).

With a HELOC, I calculate that I'll only lose about $750 in tax deductions per year; at that rate, it would take about ten years before the closing costs of a mortgage are eclipsed by the loss in tax deductions of a HELOC. Again, for me, the flexibility of being able to reduce interest payments by aggressively paying down the HELOC when I have cash to spare is attractive.

Anyone have strong feelings one way or the other?