All Forum Posts by: Melanie Rodriguez

I've done both. HELOCs are much easier. I bought my first two rentals for cash from a HELOC. I also did a cash out refi on my primary 5 years ago and bought 3 rentals with the cash putting 20% down. All three rentals have doubled in value since I bought them so no regrets!

If you cash out $200,000 and spend it on an investment, that's it. You spent it once and it's locked into another property.

If you get a line of credit, you can spend that $200,000 (or part of it), pay it off, and then spend it again. It's like a credit card that you can use over and over again. You also don't pay any interest unless you borrow, and then only for the amount borrowed.

I don't recommend using a line of credit unless you can pay it off faster because it comes with a higher interest rate.

@Melanie Rodriguez interest rates are still at historic lows. I remember my dad telling me "You will never see a home loan as low as 6% again in your lifetime" Interest rates are on the rise and could be higher for a long time. So locking in a long term fixed rate could be a good idea. Most if not all credit lines are adjustable rates.

If you have a fixed rate refinance and rates go lower you can always refinance later.  It seems to me the fixed rate refinance is both less risk and less headache.

Yes one lender can tell you how both options would compare. 

“Im general” depends on what you plan on doing with that cash. You say use it for your first investment property. Turnkey and ready to rent the day you close? Purchase and rehab where you won’t need access to all of that cash the day you close? Have you identified said investment property? If not, how long until you do? A line of credit comes with more flexibility where you pay interest only on what you borrow, granted at a variable rate. On a fixed loan you get your chunk of cash and start paying interest immediately. If that cash is just sitting in your checking account for the next 6 months, it makes no sense. 

If you already have the next investment lined up you can always do a bridge loan or make an offer subject to being able to pull cash out of your existing property (for either the entire purchase price or a downpayment plus new financing). The markets are cooling off so there is more wiggle room for the buyers.

Lots of ways to go here… unless of course you really just want a chunk of change to go buy a boat, gamble in a casino, or go an extra extravagant vacation 

Right now my borrowers are getting around 7% interest rates on their cash outs and I heard the fed just raised rates again. I guess it's all about whether you prefer the cash or the line of credit 

Hard to tell without more information and what you qualify/are being quoted for for new financing, but considering you are already at a 6.125% rate, that means cash-our refi might make sense for you moreso than a lot of others out there who have locked in much lower rates