HELOC or DSCR cash out refi???

[Andrew Ibarra]

Hi everybody,

I would like to get opinions and recommendations from you on what to do next. 

Currently finishing up a AirBnB. The property has no mortgage just paying for insurance/utilities. The plan is to pay off some personal debt, file a lawsuit, and start a new flip or buy n hold.

Would it be better to do a DSCR cash out refi and let the property pay itself off/cash flow.

or

Should try to go for a HELOC (if possible) to continue my plan?

Thank you for your input!

[Jason Wray]

Andrew,

If you plan on investing a HELOC is not the best choice for multiple reasons. They are good for the rainy day or the "what if factor" pretty much like a credit card. If you are going to be using if for buying more REI there can be some road blocks which can arise after application/appraisals. A HELOC is an open end mortgage again same as a credit card. They carry a credit risk and are viewed as a liability never as an asset or liquid reserves required when purchasing additional REI.

The other issue is at any time the HELOC can be closed or reduced if your credit score drops or your debt to income ratios increase. Just like a credit card the bank/lender who holds the heloc will monitor your credit. On a cash out refinance its tax free, and you keep it in your bank where its there when you need it without risk. It actually can be used as a qualifying asset and PITI reserves required for additional REI during underwriting.

Plus cash in hand is king where it can be used to put more earnest money down on a contract for an aggressive offer or down payment.