Financing Advice on SFR's

[Devon Craychee]

Hello,

I am looking for some advice on the best way to use the equity in my two rentals to buy additional properties.  Here is my current loan info:

House #1 - 64K left on loan.  House is on zillow estimate for 142K.  I know zillow is not the place to go to for estimates I just wanted to put it out there.  My realtor says the house is worth 160K and will sell immediately.  

House #2 - 88K left on loan.  House is on zillow estimate for 157K. I know zillow is not the place to go to for estimates I just wanted to put it out there. My realtor says the house is worth 170K and will sell immediately.

 Both homes are on 30 year loans:

House # 1 - 4.625%

House #2 - 4.5%

I would like to put these on 15 year notes. 

I have been told it's not worth it to refinance and pull money out because of all the fees I would be paying. I have also been told I can not do a HELOC either because they are investment properties although I have read and listened to a lot of investors on here that seem to be doing them.

I do have additional cash on hand to invest but I would like to use the equity build up in these two properties in addition to put myself in an even better position to purchase either a couple more SFR or a Multi family.

Both homes are located in Nampa, Idaho and are financed through a large bank, not a local community bank which I would like to start building a relationship with.

I would appreciate any advice.

Thanks,

Devon

[Andrew Postell]

@Devon Craychee we will all have opinions on what is the best method to having more investment properties but my suggestions are two fold:

1. Cash is STILL King - once you spend your cash, it's really hard to get it back.  The equity that is in your investment properties is nice to have....but it's not doing anything.  It's not paying your bills or providing your with gas money (your cash flow does that...more on that in a second)...so if you have a use for that equity, meaning you can leverage it to gain MORE investment properties, then who cares what the fees are?  Don't get me wrong, you don't want to overpay for anything but leveraging your equity is EXACTLY the point of real estate.
2. Cash Flow - your cash flow is very important.  It helps with maintenance costs, it allows you to build MORE cash to buy MORE properties (cash is king!) so my suggestion would be to consider keeping the investment properties in a 30 year fixed rate loan.  Your investment properties are not your primary home.  So the philosophies are a little different.  Deferring your business debt works because it allows another party to pay the debt (your renter), you keep the tax deduction (the interest that is paid), and you gain more cash flow.  Just think about it from that perspective.   

Feel free to ask more questions if you need.  Thanks!