How to pull equity from 2 fourplexes that have a 3% & 4% mortgage rates??

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How to pull equity from 2 fourplexes that have a 3% & 4% mortgage rates??

Kris Lawhead
Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes

I own two fourplexes in Enterprise, AL (8 units total), held for about 10 years. They’re worth roughly $500K combined, with about $105K owed at 3.2% and 4.2%. They’re fully rented and professionally managed.

My goals:

  1. Keep both first mortgages. Those rates are too good to give up.

  2. Qualify on the properties' rental income, not my personal DTI. I'm saving that for a future HELOC on my primary residence.

The money would fund my next add-value flip.

How would you structure it?

  • Two bank-statement HELOCs, one on each building?

  • One commercial loan or line across both properties?

  • Keep hunting for a bank that will do a true commercial loan second?

  • Something I haven’t thought of?

So far, out of the 8 local banks I’ve called, they won’t do a commercial loan or line in second position. I haven’t asked about residential seconds yet. The best offers I have are a 7.25% commercial refi for both properties in first position (which means losing my low rates) and a 9.7% fixed bank-statement second with a full draw.

I'd love to hear what advice is out there!

Thanks in advance

Kris

UPDATE: The consensus seems to be to keep the first liens and find a second DSCR HELOC, Commercial Line for each property or across both properties. I would love to run numbers and talk to potential lenders if anyone can share some contact information. I don't know if it is against policy to recommend names or companies on this forum, since I haven't gotten any, but if that is the case then feel free to DM me.

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Alexandra KempBusiness Member
Lender · Member since 2026 · 13 posts · 13 votes
4d

There are some good comments here. I think the key is making sure that if you’re borrowing at a higher rate, the return on that money justifies the cost. Sometimes you have to leverage existing assets to acquire the next one, but you also have to be careful not to overleverage and structure it correctly.

Traditional banks can be pretty cookie-cutter, which is why working with someone who understands non-agency lending and common-sense underwriting can make a big difference. There are second-lien options that may allow you to keep those low-rate first mortgages in place, as well as business lines of credit worth exploring. It’s really about finding the right structure for what you’re trying to accomplish, not just getting access to the money.

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  • Jim BlackburnBusiness Member
    Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 329 posts · 126 votes
    3d

    @Kris Lawhead - two rental helocs/he loans are the way to go so you don’t lose your low rates. Jim

    954-993-1625
    Stairway Mortgage, a Division of NEXA Mortgage LLC598 Reviews
    WebsiteView Page
    0Reply
  • Max Comperatore
    Technology · New York, NY · Member since 2026 · 62 posts · 16 votes
    2d

    Kris, Ashish and Rickey framed it correctly: protect the firsts and price the second on property income. The math supports them. Your $105K firsts blend to 3.63%. At a 25-year amortizing constant near 6.1%, annual debt service is about $6.5K against $72K gross rent. Even at a 50% expense ratio, NOI is $36K, so first-lien DSCR is roughly 5.5x. A $150K second at 9.7% interest-only adds $14.6K, total debt service $21.1K, DSCR about 1.7x. That clears a 1.25x floor. Combined LTV is 51%, well inside a 65% second-lien box.

    Devin and Stephen are right on structure. One lien per building preserves optionality; a blanket cross-collateralizes. The 7.25% cash-out refi is a false economy. Replacing $105K at a 3.63% blended rate with $255K at 7.25% creates roughly $15.6K of incremental annual debt service on the $150K you need, an effective 10.4% cost, while extinguishing the cheap firsts. The 9.7% second is cheaper carry and keeps the asset-level debt constant low.

    Rickey's draw point is the real proof. A full draw starts $14.6K of annual interest immediately. A draw-style line sized to the flip's S-curve, with average outstanding near 60%, carries about $8.7K. On the flip, $150K against $400K all-in is 37.5% LTC; against a $500K ARV it is 30% LTARV. Horizontal infra per pad is zero here because both assets are stabilized vertical improvements, so no development carry. What is your actual all-in basis and ARV, and will the lender commit a draw schedule before you close?

    0Reply
  • Justine Sanchez
    Member since 2020 · 27 posts · 3 votes
    2d

    Hi Kris, keeping those 3% and 4% firsts is the right call if you only need a slice of the equity for the next flip. Local banks often won't do investor seconds, so the products that usually fit are non-bank DSCR-style HELOCs or second-position loans that qualify mainly on the rent roll rather than your personal DTI. I'd price one loan per building versus a blanket across both, because separate liens leave you free to sell or refi one later. Before you lock anything in, compare the full cost of the second (fees, draw rules, and how much they'll actually advance behind your firsts) against what you expect the flip to return, and confirm your current first mortgages even allow a second lien. Roughly how much are you looking to pull for the next deal?

    0Reply
    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes
      12h

      Hi Justine, thanks for the reply. Several people have now pointed me toward non-bank DSCR-style seconds, so that's where I'm focusing.

      To answer your question, I’m looking to pull about $75–100K. The plan is to use a hard-money lender for most of the purchase and rehab on a flip around $400K in Coeur d’Alene, Idaho, and use my equity to cover the gap.

      Do you have any non-bank lenders you'd recommend for DSCR-style seconds on 2–4 unit rentals in Alabama? And if you lend yourself, I'd be glad to see what you could offer.

      Thanks,
      Kris

      0Reply
    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes
      12h
      0Reply
  • Gregory Vassilatos
    Investor · Member since 2026 · 7 posts · 1 vote
    18h

    Kris, don't touch those firsts. The 7.25% commercial refi looks cheaper until you reprice the whole $105k, while a second only costs you on the new money. Local banks often don't offer investor seconds, so non-bank HELOCs or closed-end seconds sized off the rent roll are the usual fit. With about $6k a month in rent and $105k owed against roughly $500k, the equity is there. Confirm the firsts allow a junior lien, then price one lien per building against a blanket loan. A draw-style line sized to the flip gap ($75–90k) usually beats a full-draw second, so you're not paying interest on idle cash. Happy to sanity-check combined LTV and what a rent-qualified second would typically look like if you DM me the rent rolls and target draw.

    0Reply
    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes
      12h

      Hi Greg, thanks for the reply. You’re the fourth or fifth person to say “don’t touch the firsts,” so I’m convinced.

      Here’s my summary:

      • Two fourplexes in Enterprise, AL, worth about $250K each

      • Rent: $750/unit, $3,000/month per building, 100% occupancy for years

      • Balances: about $60K on one and $45K on the other, at 4.6% and 3.2%

      • Target draw: $75–100K as a draw-style line, to cover the gap on a flip

      Could you sanity-check the combined LTV and tell me what a rent-qualified second would typically look like, including rate, fees, and draw rules? And if you lend, I'd be glad to see a quote.

      Thanks,
      Kris

      0Reply
    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes
      11h

      Hi Greg, thanks for the reply. You’re one of several people saying “don’t touch the firsts,” so I’m convinced. Here’s my summary:

      Unit 12 (Wells Fargo)

      • About $45K owed at 4.625%

      • Rent: $3,000/month, near 100% occupancy for years

      • Taxes: $861/year; insurance: $2,602/year

      Unit 10 (Carrington)

      • About $60K owed at 3.3%

      • Rent: $3,000/month, near 100% occupancy for years

      • Taxes: $1,323/year; insurance: $3,648/year

      Both are fourplexes in Enterprise, AL, worth about $250K each. My target draw is $75–100K on a draw-style line.

      Could you sanity-check the combined LTV and tell me what a rent-qualified second would typically look like, both per building and as a blanket, including rate, fees, minimum loan amount, and draw rules? And if you lend, I'd be glad to see a quote.

      Feel free to DM me instead of replying on this.

      Thanks,
      Kris

      Feel free to DM me instead of replying on this.

      0Reply
  • James Loffredo
    Lender · Dallas, TX · Member since 2024 · 28 posts · 11 votes
    16h

    Kris, don’t touch those loans for one flip. Honestly, who knows when we’ll see rates like that again?

    I’d find a good lender that does 100% funding, which we do for experienced flippers, and bring as little cash into the flip as possible. Funding goes up to about 75% of the after-repair value, so run your numbers off that.

    But do not touch those great interest rates.

    Have you done a flip before?

    I run a boutique lender, so weigh that.

    0Reply
    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 16 posts · 8 votes
      12h

      Hi James, thanks for the reply. Agreed, those rates stay put.

      To answer your question: this would be my first flip as the lead investor, but my wife and her family flip property for a living and she's my business partner so I feel confident in our abilities. Plus we own an excavation and site work company, so we can self-perform a good chunk of the work.

      My target is Coeur d’Alene, Idaho, with purchases around $350–400K.

      A few questions:

      • Do you lend in North Idaho?

      • Would our team’s experience qualify for your 100% funding, or what would a first deal look like with you?

      • What are your typical rate, points, and fees?

      I appreciate you advise,


      Kris

      0Reply
  • Steve Waller
    Lender · Houston, TX · Member since 2026 · 123 posts · 25 votes
    13h

    Kris, I'll take the other side of the "never touch those firsts" advice. Holding on to a 3-4% rate on a $105K balance, while roughly $395K of equity sits there earning nothing, doesn't make sense to me when that money could be going into new investments at 15%+.

    Run it on your own numbers. A 75% cash-out on $500K is a $375K loan. Pay off the $105K and that's about $270K to put to work, before closing costs.

    At the 7.25% you were quoted, the new loan costs about $27,200 a year in interest. You're paying roughly $3,900 a year on the $105K now. So the real extra cost of the $270K is about $23,300 a year, around 8.6% on the money you take out. That's still below the 9.7% second you were offered.

    Put that $270K to work at 15% and it earns about $40,500 a year. That's a spread of roughly $17,000 a year, every year, and it compounds as you recycle the capital flip to flip. Keeping the low rate saves you around $3,700 a year. Leaving the equity parked costs you several times that.

    The honest caveat: this only works if you really have the deals lined up and can keep the money working. Cash sitting idle at 7.25% is worse than the 3% loan you started with. If you'll only use part of it at a time, a line you pay on only when you draw it may be the better fit.

    Non-bank lenders will do this on the rent roll rather than your personal DTI. They're just not local banks, which is why six of them told you no. Send me the rents, taxes and insurance on each building and I'll show you what each structure looks like side by side. My contact info is on my website, via my profile.

    0Reply
    • Jim BlackburnBusiness Member
      Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 329 posts · 126 votes
      11h

      @Steve Waller - Why not keep the 3% 1st and take a fixed 2nd up to 85-90% at 8-10%? You can still access the equity but keep the low cost of capital on the first.

      954-993-1625
      Stairway Mortgage, a Division of NEXA Mortgage LLC598 Reviews
      WebsiteView Page
      0Reply
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