HELOC vs Refi to finance a STR?

[John Robart]

Hello!

New to the community and interested to hear your opinions on what could be the best strategy for me.

2 years ago my father passed away and I inherited a single family long term rental. I have been holding and self managing, there are long term renters who are GREAT tenants already in place. The property is in a small market, but it’s not even 50 feet from the brand new elementary school that was built in the last 5 years. A lot of other pros I haven’t mentioned. Even though I claimed a nice step up in basis and the property is paid off, I don’t want  to sell. 

My fiancé and I want to get into the short term rental game. We identified a market we are interested in, and have been evaluating properties. I understand a short term rental is a bigger investment than a long term because we have a little rehab to do, and furnishing as well. It’s also a more active investment. 

Given the current lending landscape, I am wondering what the best strategy would be for us to finance this short term rental. Would a HELOC on my existing rental be a better option than a traditional refi? If so, why? I have about 150-200k in equity in that property.

Any and all information would be appreciated! Thank you!

[John Underwood]

Quote from @John Robart:

Hello!

New to the community and interested to hear your opinions on what could be the best strategy for me.

2 years ago my father passed away and I inherited a single family long term rental. I have been holding and self managing, there are long term renters who are GREAT tenants already in place. The property is in a small market, but it’s not even 50 feet from the brand new elementary school that was built in the last 5 years. A lot of other pros I haven’t mentioned. Even though I claimed a nice step up in basis and the property is paid off, I don’t want  to sell. 

My fiancé and I want to get into the short term rental game. We identified a market we are interested in, and have been evaluating properties. I understand a short term rental is a bigger investment than a long term because we have a little rehab to do, and furnishing as well. It’s also a more active investment. 

Given the current lending landscape, I am wondering what the best strategy would be for us to finance this short term rental. Would a HELOC on my existing rental be a better option than a traditional refi? If so, why? I have about 150-200k in equity in that property.

Any and all information would be appreciated! Thank you!

 Heloq and then pay it off as soon as possible. Then that equity will be there to use if you need it for another project.

A refi at these higher rates would be for a long time.

Also make sure you advertise the school nearby not for the bonus but to make sure that no one who can't be close to a school accidentally rents your house.