What is my cheapest option to pull out equity

Question

Current situation:

I owe: 317k

Appraised value: 576k

This includes 4 SFH rentals and my primary. The rentals are all portfolio loans from a local bank 15 years @ 5%. My primary is conventional 15 years at 2.1%.

My market is very cheap and 1%+ deals are everywhere. I manage my own property, do my own rehabs, and rent them in days after completion. The overall risk feels low. There are very few SF rentals available on the market so rent has exploded upward. I’m looking to scale up and Multi family is very inclusive and extremely competitive here. So I plan on sticking to what works.

My goal is to put my equity to work without going overboard on refinance costs since the equity is spread over 5 properties.

I’m considering a HELOC (85%? I’ve never had one) on my primary and some cash on hand to pay off 2 properties that I only owe about 30k each. Then pull a 12 month line of credit, an option from a local bank, using both properties as collateral that I can borrow 90% LTV. Giving me an open line of credit for 166.5k for 2k a year.

Which leaves me with 113k debt on the other two, with 112k trapped equity. I could refinance them to conventional mortgage with a much better rate @ 80% LTV giving me 67,000 cash out - 8,000 for the refi. Total cost would be 10k + cost of HELOC on my primary.

Any thoughts or better options? I’m new to financing and I’m sure there is a lot I don’t know I don’t know.

Rob Hayes · Answer

Sounds like you have it all figured out to me!   I suppose the answer to your question depends on what you're trying to accomplish.   If your goal is to get the cheapest money for the longest period of time than you really can't beat 30 year fannie/freddie money!   If you're looking for something creative to think about...You could find investors who want a piece of the deals that you already have and would be willing to give you cash for a share of your equity.   But for me... if you can quality for big bank money there's no reason to overcomplicate it.   Good luck...Let us know what you end up doing!