HELOC Hiccup... what’s next?

Question

Hi all!
I am new to the world of real estate investing and so far I have been very fortunate with my first investment. I bought a duplex, that I completely renovated and now I live in one side and air bnb the other. I recently refinanced and it appraised for about $70k more than what I bought it for. I am wanting to pay off some of the renovation costs and begin the process of getting another property.
I applied for the HELOC but it didn't come back nearly as much as I was hoping for. Im really needing to pay off some of these renovation costs before the interest increases. Should I look at personal loans? Credit unions? So, here I am seeking advice from all you lovely people. Any advice will be greatly appreciated!
Thank you!

Tiffany Tumlin · Answer

@Caroline Gerardo Thank you for responding. The credit union said that they would loan 80% of the appraised value minus what I currently owe on my mortgage.

I did think that it should’ve appraised for $20k more but we had just had a tornado come through the area that effected a nearby neighborhood. The appraiser said that it could be responsible for some of the decrease.

Tiffany Tumlin · Answer

@Jason Pedersen Thank you for responding!

I have 2 cc and 1 plumbing finance. The totally is roughly $25k. The interest on the plumbing is about to go up and I’m just trying to avoid that at all cost. I’ve thought about consolidating but I just don’t know much about it. I took a big jump with this house and it’s paying off, even through the pandemic. I’m just really to avoid those interest rates and be stuck.

Caroline Gerardo · Answer

I assume the property did not appraise as high as you hoped? A variable rate HELOC typically has a ceiling of 18% - though rates today are very low. Also when things go south the lender can close the HELOC. Can you be specific as to what loan to value they offered you and why?

Jason Pedersen · Answer

So you did a refinance, pulled some money out, but it wasn't enough to cover your renovation costs? Where are you carrying the cost of the renovations now? Credit cards? How much do you still have to payoff? Just trying to understand the situation fully.

I think the most obvious answer is to take the cashflow from your Airbnb to pay down the debt. If you have a lower interest rate on the HELOC vs your renovation debt, perhaps you use the HELOC to pay that debt down and then pay down the HELOC with the cashflow. Personal loans, I believe, generally have a higher interest rate than collateral backed loans like a HELOC...