HELOC and financing question

[Bob Manning]

Hello BP,

I had a question or I'm looking for advice on my HELOC.

I currently own two short term rental condos at a Northeast ski resort.  Everything is going really well for both condos.  I'm getting great nightly rents and very few vacancies during the ski season. The properties are cash flowing and running smoothly. There's been significant appreciation there this year as well. All good.

I purchased the 2nd unit with a HELOC I took out on my primary residence in April of 2020. I've been paying the interest only on the HELOC for 10 months now. Am I throwing money away by only paying the interest? I'm wondering what the next step is. Do I refinance the condo in a traditional mortgage now? I'd like to free that HELOC money up to do another deal. I thought by keeping the loan payment low I'd be able to increase cash flow and save up for another down payment.

Any advice is appreciated. 

Thanks!

Bob 

[Benjamin Aaker]

Why not use the profit from the first condo to pay down the HELOC? The interest rates on those are higher than many commercial mortgages. If you are in a hurry to get #3 then refinancing might be the way to go, but you will essentially be using that money to pay the down payment on #3 anyway. When refinancing, you take equity out from whatever you have built and your cash flow goes down. Just be careful you don't over-leverage.