HELOC or Cash Out Refi. BRRRR Questions

[Scott S.]

Maybe this question belongs on the BRRRR forum. In any case, I'm asking about financing AND BRRRR so I guess it could go in either place.

I have a rental unit (3BR/2BA) that I planned on doing a BRRRR with. I got it before it hit the MLS, purchased with a commercial note and financed the renovation out of pocket with me doing most of the work. I put somewhere between $9k and $10k in it and the ARV is probably in the $145k range. Long story short, I only owe $68k on this place, so I've got some equity in it. It cash flows nicely and I'm getting around $350/mo. net (after cap-x, and other expenses).

So there's the status.  Now, here's the question.

I understand the BRRRR method I need to get that extra equity out of it to purchase another and do it all over again. Won't getting that cash out just eliminate any positive cash flow I was able to pull out of this property?  I have quite a bit of equity in it, but I can't see getting another unit in this market at the same kind of deal I got on this unit.  

Also, I don't really know the benefits of HELOC vs cash out refi. Would you rather do one than the other?  If HELOC, how are payments made on that?

Thanks folks!

[Scott S.]

Thanks Scott.

Why would you recommend the HELOC? Are you saying go with the HELOC because it will allow me to keep the existing loan rate and that way I'll only have to get a higher rate on the amount of the HELOC?

I've got a 5 year balloon on the existing mortgage (commercial loan) that is 4.1% that will be due in 3 years, currently amortized over 20 years.