Paying cash and refinancing vs mortgaging each property?

[Michael Saccone]

The house you live in is free and clear. You take out a $125,000 HELOC from this house to invest in multi family properties.

Your strategy is buy and hold multi family homes (2-4 units) for the next 5-10 years to build cash flow to replace your present employer income.

Do you: (A) put down payments on 4 - 5 different multi family homes and put a mortgage each one (B) buy one multi family home for cash, refi it out, pay off your HELOC on it and then roll into another home to continue this process or (C) have another idea?

[Frank Jiang]

Depends on your strategy.  If you're not putting any work into these properties A is superior to B because you pay more for a loan to refi out than simply getting a conventional loan in the first place.

The reason people usually pick B over A is because the refi out is dependent on the ARV, which means you can theoretically pull out more cash than you put into the property in the first place if you buy smart and create equity.