Cash out refinance or equity loan???

[James Hunt]

Hello BP, Looking to pull some money out of my rental to use for a 2nd property. Any advice?

[Kevin Siedlecki]

@James Hunt, you need to get some terms from the bank to decide which is better. Some general thoughts as you go into it: 

If you can get a refi at a better rate, do that. If your rate would be higher on the cash out, then do the loan. That way you keep your lower rate, and only pay a higher rate on the second loan.

Consider a HELOC, too. Getting a HELOC on my primary residence just over a year ago was the biggest positive shift of my investing career. You're only paying interest on the money you actually borrow, and can pay back interest-only for up to 10 years, depending on the terms. I used it as a negative-balance checking account for two medium-sized renovations. Now I'm just paying it down with the cash flow from the rentals. I'm about to pull a large sum again for a down payment on a new acquisition. The HELOC has opened up a ton of opportunity for me, and it's much more flexible than a refi or a second loan.

Good luck!