HELOC Yes or No?

[Benjamin Stacey]

My wife and I are needing some advice on if we should get a HELOC or not at this time.

Current situation:

We currently own a duplex, a short term rental in the Smokies and a primary residence. We currently live in our primary residence and have the intent of moving out in 1.5 years and make it a short term rental once we move out. The plan regarding primary residence is to finish the basement out to increase a number of bedrooms and capacity for the short term rental. Finishing the basement would make the
primary residence a 5 bd/3.5 bath from a 4 bd/2.5 bath. Doing this will increase the projected annual revenue from approx. $52,000 to $80,000.

Plans:

We have been investigating getting a HELOC on the duplex. Talking with the lender we can get a HELOC for $60,000. We currently have about $60,000 of our own money to use for investing/renovating our properties. We estimate that the basement will cost approximately $30,000. We plan to add a bedroom and a full bath to the basement. Eventually we would like to fix up the short term rental in the Smokies as well, thinking that we could do this for approx. $5000. However, right now there is no rush on the short term rental. The priority is finishing the basement.

We are needing some input on if we should go ahead and move forward with this HELOC to help fund our future renovations/future investments or if we should be using our own cash. My thoughts on the HELOC are that we could use it to renovate our current properties and use the funds to fix up distressed properties in the future(doing BRRR-like activities) and thinking it could be used as a safety net if needed.

Should we be doing this HELOC if we are unable to pay it back in full at a later date. We have thought about how the HELOC payments could be "wrapped" in the expenses of the short term rental once we have it up and going, paying it down over time. However, this would drive down our cash flow. We project we would still be cash flow positive even with the extra costs of the HELOC, but we would ideally rather have more cash flow then less at this time

What are things we need to be considering or thinking about? Just trying to figure out if a HELOC at this time is the best decision.

Thanks for all the help!!