Cash out refinance and/or HELOC to fund first BRRRR method prop

[Jeremy Blackburn]

We're looking to purchase our 1st investment property using the BRRR method.

We have our Primary home that has about 250K in equity at 4.25% 30yr fixed FHA.

In your opinion, do you suggest refinancing the primary and pulling out enough funds to finance a down payment plus rehab cost for a single family where purchase is around $100k - $200k for A single family without a HELOC? Pull out max amount without HELOC?

Or

Would you recommend doing a cash out refi along with HELOC? If so, how do you determine how much of each to take out?

Of course if you have any other ideas with this scenario, please share. Thanks for your feedback in advance. Good luck to everyone!

[Axel Meierhoefer]

@Jeremy Blackburn You current rate is not horrible and it is probable that mortgage rates could go even further down than they are right now. With that in mind I would keep an eye on the interest rate market and get a HELOC in the meantime. When you cash out refi, your mortgage will basically rest and you will be back to paying the bank and almost no principle + have the cost of refi added to your mortgage. With the HELOC you can avoid that.

It is also important to know what your overall strategic plan is. I always work thru that first with my mentoring clients. If you plan to do more BRRR's in the future to reach a certain goal, having an established HELOC that you can use as a credit line as @Christian Manhard was describing will continue to be beneficial. If, on the other hand, you plan to get into cash flow positions with the aim to ultimately replace your income or develop a passive income position, you might need to approach the situation differently.

I would also calculate how much a 15 year refi for your current home would look at a much lower interest rate versus another 30 year if one of your goals is to get rid of the liability of your home.