Q&A: Cash Out Refi or HELOC – Which Is Better? – Episode 801

If you’re looking to utilize the equity in a rental property, should you use a cash-out refinance or a home equity line of credit? On this Q&A episode, I’m answering this question by comparing the two products and sharing my personal preference.

I’m also answering more listener questions on topics like how to find qualified tenants for your rental property, and how to decide if you should sell a rental property from your portfolio. I hope you find this episode useful. Please join me for episode 801 of Investing in Real Estate!

On this episode you’ll learn:

• The main differences between a cash-out refinance and a HELOC.
• How to find qualified tenants for your rental properties.
• How to decide if you should sell an investment property.

The Main Differences Between a Cash-Out Refinance and a HELOC

A cash-out refinance and a HELOC are both great ways to tap into your equity. A cash-out refinance will give you a lump sum check, and a HELOC works more like a credit card in the sense that you start with a zero balance. Both products can be a smart move for utilizing your equity. Personally, I prefer the HELOC because it uses simple interest and you can reuse the credit line as you pay it off.

However, it can sometimes be difficult to find a HELOC on an investment property. Try local banks, Flagstar Bank, and Churchill Mortgage. And while I’d prefer a HELOC, it’s important to note that a cash-out refinance can also help you reach your goals.

How to Find Qualified Tenants for Your Rental Properties

Finding the right tenant is an important job, which is why I recommend hiring a team for the job! Working with a property management company is well worth your dollars, especially when you consider all of the time you’re saving! See my videos on property management here and here.

Should you choose to forego hiring a property manager, I’d definitely suggest going through a similar protocol that a property management company would do. This would include a thorough background check, rental history, and employment verification.

How to Decide If You Should Sell an Investment Property

Any time you have a tenant turnover, it’s a great time to take a look at what’s going on with your portfolio. You should consider if it’s a good time to raise rent, and consider the overall performance of the property. Run your numbers and determine if the property is performing well in your portfolio. See my IRR video for more details on calculating returns.

If the property is no longer aligned with your goals, it would be smart to sell it and use the profits to buy a property with better returns. Another option is to do a 1031 exchange.

Ask Me a Question at morrisinvest.com/clayton

Episode Resources
Book a Call with Our Team
SimpliSafe.com/investing ← Get 40% off your home security system!
morrisinvest.com/Clayton
How to Pay Off Your Mortgage in 5 Years
Flagstar Bank
Dan Kraus at Churchill Mortgage
Behind the Scenes with Our Property Management Team 
Is a Cost Segregation Study Worth It?
IRR Video
5 Powerful Benefits of a 1031 Exchange 
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.

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