Advice on Cash-Out Refi with unique property

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Advice on Cash-Out Refi with unique property

Daniel Boone
Member since 2023 · 9 posts · 8 votes

Hello! My wife and I just finished building an STR property in Northern Arkansas. Its our second STR but the first we have built. It is a studio style tiny home on 5 acres, designed as a high-end couples retreat in the woods. We've been live for a few months and its doing far better than we expected.

We recently had the opportunity to purchase the five acres next to our current lot, and are now looking to build again, but need funding. We funded the first build with a combination of cash and a HELOC on our primary residence. Our goal is to try to do a cash-out refi on the first property, use that to pay off the HELOC, and then use the HELOC to fund the second build.

Because the unit is tiny though, (200sqft) and its only been renting for a few months, I'm not sure what the best way to pull money out of that property is, or if maybe I'm out of luck until we have some proven income. Hoping someone can point me in the right direction!

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
10mo

Local credit union.

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  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    10mo

    Youre going to have to do a lot of lender shopping on this. The combination of rural, unique, and tiny (sub 400sqft) is going to make this hard to finance. I would start with local credit unions and banks for a CRE loan. The lenders search feature here on BP may help, but I would be clear and upfront about the property characteristics. Most lenders sell their loans to the same handful of secondary market investors, most of whom will not fund with this kind of property.

    2Reply
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    10mo

    Local credit union.

    2Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    10mo
    Quote from @Daniel Boone:

    Hello! My wife and I just finished building an STR property in Northern Arkansas. Its our second STR but the first we have built. It is a studio style tiny home on 5 acres, designed as a high-end couples retreat in the woods. We've been live for a few months and its doing far better than we expected.

    We recently had the opportunity to purchase the five acres next to our current lot, and are now looking to build again, but need funding. We funded the first build with a combination of cash and a HELOC on our primary residence. Our goal is to try to do a cash-out refi on the first property, use that to pay off the HELOC, and then use the HELOC to fund the second build.

    Because the unit is tiny though, (200sqft) and its only been renting for a few months, I'm not sure what the best way to pull money out of that property is, or if maybe I'm out of luck until we have some proven income. Hoping someone can point me in the right direction!


     200 sqft?? Do you have pictures of this home? Does the home have a kitchen and bathroom? 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    • Daniel Boone
      OP
      Member since 2023 · 9 posts · 8 votes
      10mo
      Quote from @Erik Estrada:
      Quote from @Daniel Boone:

      Hello! My wife and I just finished building an STR property in Northern Arkansas. Its our second STR but the first we have built. It is a studio style tiny home on 5 acres, designed as a high-end couples retreat in the woods. We've been live for a few months and its doing far better than we expected.

      We recently had the opportunity to purchase the five acres next to our current lot, and are now looking to build again, but need funding. We funded the first build with a combination of cash and a HELOC on our primary residence. Our goal is to try to do a cash-out refi on the first property, use that to pay off the HELOC, and then use the HELOC to fund the second build.

      Because the unit is tiny though, (200sqft) and its only been renting for a few months, I'm not sure what the best way to pull money out of that property is, or if maybe I'm out of luck until we have some proven income. Hoping someone can point me in the right direction!


       200 sqft?? Do you have pictures of this home? Does the home have a kitchen and bathroom? 


      It has a bathroom and a kitchenette! For some reason I can't get any photos to upload in this thread, sorry! Here is the link to our listing: Airbnb Link

      0Reply
    • Erik EstradaBusiness Member
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      10mo
      Quote from @Daniel Boone:
      Quote from @Erik Estrada:
      Quote from @Daniel Boone:

      Hello! My wife and I just finished building an STR property in Northern Arkansas. Its our second STR but the first we have built. It is a studio style tiny home on 5 acres, designed as a high-end couples retreat in the woods. We've been live for a few months and its doing far better than we expected.

      We recently had the opportunity to purchase the five acres next to our current lot, and are now looking to build again, but need funding. We funded the first build with a combination of cash and a HELOC on our primary residence. Our goal is to try to do a cash-out refi on the first property, use that to pay off the HELOC, and then use the HELOC to fund the second build.

      Because the unit is tiny though, (200sqft) and its only been renting for a few months, I'm not sure what the best way to pull money out of that property is, or if maybe I'm out of luck until we have some proven income. Hoping someone can point me in the right direction!


       200 sqft?? Do you have pictures of this home? Does the home have a kitchen and bathroom? 


      It has a bathroom and a kitchenette! For some reason I can't get any photos to upload in this thread, sorry! Here is the link to our listing: Airbnb Link


      Wow that's a very nice property! I think this would be best suited for a local commercial lender. You might be able to get a traditional DSCR lender to finance this with an exception on the sqft, however the rate will be high..

      [email protected]818-269-7983
      LuxePrivate Investments LLC 572 Reviews
      WebsiteView Page
      1Reply
    • Daniel Boone
      OP
      Member since 2023 · 9 posts · 8 votes
      10mo

      @Erik Estrada thank you! Yes we are exploring DSCR too but want to keep our rate as low as possible!

      1Reply
  • Account Closed
    Wholesaler · OH · Member since 2025 · 1 post · 0 votes
    10mo

    Hello, send me a Dm. I have a lender I am using that I can recommend 

    0Reply
  • Elealeh Fulmaran
    Specialist · Member since 2025 · 483 posts · 270 votes
    10mo

    Nice work on the first build. For pulling cash: shop three routes in parallel. One, see if a local bank or credit union will do a first‑position HELOC on the STR based on its appraised value; some will even with short income history if credit is clean and LTV is conservative. Two, price a DSCR cash‑out refi once you've got at least a few months of booked revenue with a clear P&L and STR comps; DSCR underwrites to income rather than your W‑2, which can help. Three, line up private money as a bridge to pay off the current HELOC and start the next build, then refinance once you hit the lender's seasoning. Whichever path you pick, prep a tight lender package: appraisal comps for similar STRs, trailing month P&L, forward bookings, photos, and a clear use‑of‑funds plan.

    2Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    10mo

    Here’s the core problem: you’re running a business, but real estate lenders want to lend against real estate. If you default, the lender is left with a 200 SF structure  that’s designed for the niche business you operate. It’s not a property a lender can easily repurpose, lease, or sell. They’re underwriting the dirt and the building, you need them to underwrite your business. 

    [email protected]
    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    10mo

    Sounds like a tricky property to finance. A lender will want to see that there are similar properties selling in the area and they will need comps to arrive at an appraised value. Are there any 200ft2 houses on 5 acres nearby that have recently sold that could be considered comps? Lenders will have square footage minimums as well, typically 400-600. This will be an issue when it's time to sell also, your buyer pool will be limited if there isn't readily available financing. Can you easily add 200ft2 to hit the minimum for an FHA loan? If not your best bet will be finding a lender that does portfolio loans (that they can make their own rules on) like a local credit union. Good luck!

    1Reply
    • Daniel Boone
      OP
      Member since 2023 · 9 posts · 8 votes
      10mo

      @Steve K. Thanks for the response! Yes our CU is exploring options for us right now too. We knew this would be a tough one to finance!

      0Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    10mo

    I don't love this method that you are proposing. Sure, a cash out refi will pay off your heloc and you'll get a lower rate and be locked in to that rate, BUT- you'll also lock up that equity for a much longer time and you won't have access to a HELOC, which is the cheapest and most flexible funding there is.

    You might get creative- start meeting with some local, small banks and see who might be willing to go in to business with you. If the STR is going great, you have equity and good income, you might be able to get someone to establish a business line or credit or loan for you that you could pay off with a cash out refi on the new property when you finish. Might be some options for portfolio building loans too- never hurts to ask.

    Have you chatted with the seller for the land next door about seller financing or a potential partnership? Could be some options there to make moves with less capital. 

    If the cash out refi is the only option, I'd do it, but that would be my last resort. 

    0Reply
    • Daniel Boone
      OP
      Member since 2023 · 9 posts · 8 votes
      10mo

      @Corby Goade I should clarify, we have already purchased the land next door outright. And when I say we plan to use the cash out refi money to "pay off" the HELOC, I mean we would pay it back down to zero so it is available to build the next unit.
      We are working with our local CU currently and they are exploring options for us too. We have a great relationship with them, but I figured I should start asking for more recommendations!

      0Reply
  • Mike Cho
    Member since 2026 · 8 posts · 0 votes
    4mo

    I actually just got the same idea last week and did a HELOC. They did not really ask for any docs, and income verification was all good with my business deposits, it also funded in like the same week I applied, which I was very impressed about.

    0Reply
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