Cash out Refi or HELOC for STR purchase

[Christopher Lynch]

Hi All,

I bought my duplex in 2019 which was a house hack. I already refinanced to take advantage of rates. The cashflow is great and I’m locked in at a 3.2% rate. 

The problem is I want to grow my portfolio into the short term rental space and I have roughly 140k of dead equity sitting in my duplex. 

With rates up my payment is going to be significantly higher if I refinance. Is it a good idea to pull the equity out and use it to invest in a short term rental in New Hampshire using the 10% down vacation loan? Or should I do a HELOC and use that? Then payoff the HELOC with the STR cashflow.

My goal is to create more monthly cashflow. I feel short terms will help me achieve this goal. 

Any feedback would be awesome. 

[Irvin Nguyen]

I went with the HELOC option. my rate on my primary was 2.99% so I felt that cash out at a 6.3% was not ideal for me. HELOC seemed best for my situation because if I took out a equity loan or refi, with having to make payments right away, I didnt want to feel forced to rush to buy into a bad choice. Now looking for properties, I just take in to account the HELOC payment also so as long as the cashflow coming in covers both the house payments, expenses and AT LEAST the HELOC interest, I can tackle the principal then refi later when things go back and just throw the difference saved back into the HELOC principal as well.