HELOC or nah?

[Philip Wayne Ostriem]

I bought two properties last year and just finished renovating one of them. I have plans to renovate the second in April. Property 1 I just finished and is worth about 325K while property 2 I'm renovating in April will be worth about 200k when i'm done and it's rented out. I owe around 160K on property 1 and own property 2 outright. 

My Goal for this year is to renovate property 2, have it rented, refinance, and then buy two more properties.

Question:

I'm considering taking a loan out on 2 to pay off property 1 and then pulling a HELOC on property 1 because it will allow for more equity to be tapped into and in my market will allow for me to make "cash" offers on properties. I've only ever done a conventional finance loan with large down so the HELOC is unknown territory for me. Are there any down falls with going with this strategy?

[Jaron Walling]

@Philip Wayne Ostriem You're in a good position and you have options. Assuming these properties are rentals you need determine what level of cash-flow or equity you're comfortable with. Are these properties cash-flowing or just appreciation plays? Will you have healthy reserves for vacancy if tenants stop paying? I think theses are questions are massive. 

From my investor opinion a HELOC is "temporary tool" to buy more properties. I don't see investors leveraging buy/hold property for long periods of time using a HELOC. I think the goal is always low fixed rate mortgages, move to the next opportunity, and refi when you can. Effectively in and out into a conventional or commercial loan. Easier to do if you're adding a lot of value. If you're doing that with property #2 go for it.