Take the equity and less cash flow or

[Ty Cover]

I purchased my first BRRR in November for 80k. I've invested 70k turning it into a duplex. The top is already rented for $2000 and the bottom will be rented for around $1500 when it's completed in a couple of days.

The comps are around $250k+. 80% of 250k is 200k. So i could pocket around 50k and the mortgage would be $1800. 

Or i could just take out enough to cover the mortgage which puts the payments at $1400 and I could take out a line of credit, which would increase as a buy new properties and add them to the LOC. This could create a compounding effect.

[Julien Jeannot]

Quote from @Ty Cover:

Quote from @Julien Jeannot:

@Ty Cover

I'd say it depends on what the next steps of your long term strategy requires. If that is not mapped out, I'd recommend a quick though exercise:

- 10yr goal

- Back into 5yr goal

-Back into 3yr goal

-Back into 1yr goal

-Back into your next step.

This doesn't have to be done in detail, nor fully vetted to 10yrs. The value is in the exercise to figure out what you need to do today to set you up for the next step.

I want to continue to buy and hold rentals after force appreciation through rehab. 

The main question would be whether $50k cash would be more beneficial than a $50k LOC and $400 less mortgage payment. This will help me decide my direction in the future.

The refi will free up my original $225k LOC so I'll be able to repeat the process either way.

The additional $50k LOC won't be enough to buy and rehab a property alone. I will have to go through the process 2-3 more times until I have $150k+ in a portfolio LOC.

With cash I’ll be able to put 20% down, but it will be more difficult to do a large rehab. 

 Got it.

Here's how I think about these things.

1) LOC Opportunistic: when I don't need the funds right away and intend to pay back in short period of time.

2) Refi - Cash out: when cash flow supports it, for longer investment opportunities such as buying a house. Do keep in mind DTI ratios, speak to lender on the impact of the refi to the next purchase.

3) Refi - no cash out: to improve cash flow and DTI ratios. No investment opportunity on the horizon and cash in the war chest for future rehabs or acquisitions.