Pulling Equity out of your first home

[Jared Threat]

Hi, Bigger Pockets family. Here is my Scenario 

My wife and I own a duplex that we bought in 2017 for 144k. We live in the 1st unit that was renovated and now we are about to finish and rent our upstairs apartment. The plan is to rent the 2-bedroom apt for $1,200 a month. I've put about $50k in renovations into the house from small personal loans Around 8-10%. The plan was to eventually get that money of out the equity of the house which ARV $230k. Taking out these loans for the renovations has raised my DTI to about 54% which might be hard for me to do a home equity loan (not including the projected rent). Looking for advice to pull max equity out to invest in more properties.

Current Loan $123,000 @ 3.5%

ARV $230,000

FHA Mortgage monthly (including PMI) $1000

Project rental income per unit $1200-$1300

[Wesley Sherow]

I want to add in a small borderline unethical strategy to maximize on a refinance. (Don't worry it'll be ethical soon enough). Short term rentals are notorious for being difficult to finance with a bank as the STR industry is relatively new and not market tested as of quite yet to allow big lenders to consider them investible via a refinance. However with that in mind there do exist some lenders that will allow STR income to be presented on a refinance.

On an occasion or two I've seen friends/family or connections agree to be on lease agreements and take responsibility for the rent payment on paper, while the owner/operator was able to short term rent the property for much more than the rent payment. They would then pay in to the rent for the leased unit and take any margin as dividend. 

If you choose to take this approach, it's a way to increase your rents by a little bit over their market priced equivalent to get a better refinance out of a property. This mainly works for commercial sized multifamily however as NOI is valued over comps in those situations.

It's also not the most scalable solution, however a good little trick on your first couple investments as you're trying to maximize your income.