I'm not an expert in investments but I would have to agree with Derek on this. Using a primary residence to purchase rental property could end up costing you both homes. I also don't believe you have the equity you think in your home because values in Dearborn and Dearborn Hgts have dropped so much since 2005.
I suggest speaking with your financial planner and have them go over your options before investing. I also suggest joining one of the area Real Estate Investors Associations. There is one in Wayne, Oakland, Macomb, and Livingston the last I looked.
There are arguments on all sides of this issue. I think the answer is simply this ... consult with your trusted tax / investment professional(s) to see what makes the most sense for you and your situation
As a licensed Real Estate professional, and with all due respect to my fellow Real Estate professionas, I would never encourage someone to take the equity out of their primary residence to invest ... especially to reinvest into Real Estate. Had I done that three years ago before property values dove some 25% or more, they would be at my doorstep with gun in hand, as they would have likley lost on both ends. We THINK things are at or near the bottom, but in this world, one is never completely sure what is going to happen to our economy and as such, you need your tax, investment, and/or financial advisor giving you their professional advice when it comes to removing equity from your home for non-essential living costs.
Best wishes to you in your endeavors.
On a side noie, not sure where you're looking to invest, but I have several Detroit properties a few of my out state investors are looking to unload. They are selling in bulk for a deep discount or individually. I also have a big home in Dearborn Heights that while pricey right now, I do believe they intend to drop the price.
Keller Williams Realty
If you currently have a HELOC with an available balance (keep in mind many banks have cut off existing lines of credit) AND your time frame is 6 mos or less then you are probably best off going that route. I'm assuming with a good credit score your HELOC is probably around prime plus 1% or so, which would put you at about 6%. The going rate for an investment property with 25% down is around 7.25%. Doing it this way would save you the trouble of paying closing costs twice.
As far as the refi goes, current guidelines allow up to 80% cash out on a refi, although guidelines could change. You're probably going to need 720+ credit to do that though on an investment.
Check on the terms of your HELOC to make sure you can still access funds and if so that would make this essentially a cash deal, which also may help you get your offer accepted easier. Good luck!