Property #1: Found a 3100 square foot duplex that needed some tlc but for the right price I could afford the repairs. Decided to purchase as is. Although, I encountered a problem. Had the money for down payment and repairs but with lack of credit history I couldn’t get approved by the bank so I had to get creative. Convinced the seller to do a contract for deed with a low down payment and a year and a half later I refinanced so that my name is on the property. I have a loan for $113000and the property is worth $150000 at the minimum. Both units are rented and I’m sitting well with cash flow.

Property #2: while on the contract for deed for the 1st property, I found a second property that was a 1600 square foot duplex that I negotiated a good price for and pursued a rent to own contract. Roughly a year and some change later I’m officially closing on the $130000 property with an $80000 loan. I live in one unit and the other unit is rented with cash flow.

Now, here's where I need advice. With my name on two duplexes and with my current LTV's on the properties... what should I do to leverage these properties in order to purchase my next duplex? For example, can I pull out a HELOC on them, refinance them, and use the funds from the HELOCS as a down payment for property #3?

Any advice will be greatly appreciated!

Best Regards,

A fellow property investor

I think Property #1 is going to be tough to pull equity. Your LTV is ~75% and it is an investment property. You can refi, but most likely banks will only lend up to 70-75% LTV on your investment property. If your credit has improved, you may get better terms than you currently have and, even though you may not pull equity out, you can reduce your monthly payment = increase in month cash flow.

You have more options to pull equity on property #2. Your LTV is ~60%, but more importantly, it is your primary residence. You can either refinance with a conventional 30 year fix rate mortgage or doing a HELOC. A conventional loan may allow you to pull little bit more of your equity than a HELOC, but you will have a monthly payment whether you use the money you pulled, or not. On the flip side, the terms offered are hard to beat and you can lock a rate for 30 years and eliminate the risk of future rate increases.

Since property #2 is your primary residence, you should finance it as such with 3% to 10% down, no more.

Talk to some local banks that do portfolio lending and see if they will work with you to eliminate or reduce seasoning period.