Using a Heloc to BRRRR first long term rental question

[Anna Sarvis]

My parents are interested in buying a property in their neighborhood using a HELOC to buy it for cash. We are brand new to real estate investing and are not sure how to go about this deal. The property is listed for $259,900 and needs new floors and updating to the kitchen and bathrooms. Their current house that they live in is fully paid off and has been for many years and is worth around $350,000. Can someone explain how using the Heloc to purchase the property with cash, then rehabbing it, then renting it out and then refinancing the home would benefit them in this scenario? They like the idea of owning this property as a rental and then eventually having it for a family member to retire in since it is one story and in eye shot of their current home.

I just don't understand how a cash out refinance works and what the benefits would be for it as opposed to simply purchasing the home and renting it out without doing the reno and refinance part of it.

Would love any advice or clarification here!