Cash out or Refi? That is the Question?

When you start out investing in Single Family Homes or Multi-family Class C/B… optimizing every single fee dollar (emergency fund of course) into down payments for more assets that put cash into your pocket, things are simple!

Now when you start to add things into the mix like your mother lives in your home, you want to househack your brother, your wife will only let you get two homes per year, or you can sell a condo for some random reason things get really hard.

Personally, I don’t really have any restrictions of the sort but every situation is different especially if you have one of the aforementioned constraints.

One of these examples is to sell properties when the total return on investment decreases to a point to where the total returns (cashflow, tax benefits, appreciation, and mortgage paydown) get below ~15% or less than the next best thing. Now some people can’t sell these properties to property optimize the equity into other investments and for those people cash-out refis and Helocs are an option.

Check out this link and learn the nuances of the Heloc vs  Cash-Out Refi strategy.

I will say one bad thing about Helocs is that you can’t get a loan for the entire amount.  There is always 10-15% of the equity you are never going to get at – like the last few cups of water in my Brita filter dispenser… errrr! I see people try to quantify Helocs with interest rates but I feel that’s the bad way to argue its usage because it does not take into account the 10-15% left over in equity.