BRRRR without refinancing?

[Darrel Hernandez]

Hello all! I was speaking to an investor I met regarding the BRRRR strategy I was planning to do a propert I just picked up and he mentioned he does this process with a slight difference, he doesnt refinance!?!?!?! After my initial shock he explained that instead of refinancing and paying closing costs etc. He instead pulls a HELOC on the property instead, so that he can continue to get higher returns through rent until he is ready to purchase the next property. Does anyone else do this? Is their pros/cons to doing either?

[Aaron W.]

@Darrel Hernandez This can be a common strategy to pull the equity out of the property through a HELOC versus a refinance. There are advantages and disadvantages of each method.

With a HELOC, the advantage is the flexibility of pulling out the equity when you need it. You are only required to payback and are charged interest on what you take out. Typically, you are only making interest payments on what you take out. The downside is the interest rates are a bit higher.

With a refinance, you can typically get a lower rate than a HELOC; however, the largest downsides are the fees and closing cost along with the fact you have to start making principal and interest payments right away.

Can't really go wrong with either method. You should take into consideration when you need the funds.

Best of luck!