Seeking to Access Equity in Investment Property

Austin, Texas
Mortgage Brokers & Lenders
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Seeking to Access Equity in Investment Property

Clinton Grady
Member since 2019 · 5 posts · 3 votes

I own an investment property in Austin, TX with significant equity that I'd like to access. 

The situation: Duplex in which equity is at least 60%, with a 3.87% rate currently, and a Rent:PITI ratio of about 1.35. I have a great credit score and am employed. The only blemish is that a five year tenant recently moved to monthly instead of their typical annual lease.

I'd like to preserve the current rate on my mortgage, which likely leads me to HELOCs, HELs and possibly 2nd lien DSCR, but I am open to any options.

Given that information, what do you recommend?  A message with specifics including rates, fees, and other terms , info about your organization, including a website and references would be welcome.

I look forward to hearing from you and working with you.

Best

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  • Derek BrickleyBusiness Member
    Lender · Ann Arbor, MI · Member since 2021 · 663 posts · 226 votes
    10mo

    Hey Clinton,

    Depends what you're looking to do, do you have any plans to reinvest it right away or are you just looking to have access if needed?

    If you're open to a full documentation option you'd be able to get a home equity line of credit, which would have the most beneficial terms.

    Any alternative documentation 2nd liens would have higher rates/costs but are definitely possible.

    Feel free to reach out if you'd like to go through some of those possible options though.

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  • Thomas TalbertBusiness Member
    Property Manager · Austin, TX · Member since 2024 · 96 posts · 71 votes
    10mo

     Something else to consider is actually a 1031 exchange, this would allow you to access the equity in your home, not pay taxes on it and get a step up in your tax basis. After the purchase you can also deploy a cost segregation study to front load cash flow. 

    This route may be favorable if you don't care to take out another loan and potentially buy two properties. 

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    10mo
    Quote from @Clinton Grady:

    I own an investment property in Austin, TX with significant equity that I'd like to access. 

    The situation: Duplex in which equity is at least 60%, with a 3.87% rate currently, and a Rent:PITI ratio of about 1.35. I have a great credit score and am employed. The only blemish is that a five year tenant recently moved to monthly instead of their typical annual lease.

    I'd like to preserve the current rate on my mortgage, which likely leads me to HELOCs, HELs and possibly 2nd lien DSCR, but I am open to any options.

    Given that information, what do you recommend?  A message with specifics including rates, fees, and other terms , info about your organization, including a website and references would be welcome.

    I look forward to hearing from you and working with you.

    Best


     Hey Clinton, 

    You might want to try a HELOC first if you can qualify for it. If not, a DSCR loan with a low PPP will be efficient. The rates on these are very high on a 2nd, so you might want to pay it off through a cash out on another BRRRR

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    9mo

    @Clinton Grady, I love that you're taking advantage of using the equity and making moves. The beauty of real estate. I will answer from a tax perspective. Pulling equity from a rental is pretty clean. A HELOC or HEL is usually the best move because you get to keep your low 3.87 percent first mortgage, and the interest is typically deductible as long as you use the funds for another investment or rental project. A second-lien DSCR works too, but rates are usually higher.

  • No tax hit when you pull the equity. Just be sure the funds go toward investment so the interest remains deductible. I also like Thomas's idea if you are ever considering moving up from this property. This strategy works best if you can find a replacement property you want within the timeframe allotted and that meets the identification requirements of a 1031 exchange. And he's right to consider a cost segregation study post-purchase, which can accelerate depreciation deductions and boost early cash flow, making it especially attractive to investors looking to maximize short-term returns.

    There are plenty of great lenders on here who can help you explore creative financing options, and we work with many trusted partners who help our clients do this all the time. The key is finding one who won’t just do what you ask, but will walk through all the options with you, sometimes there’s an even better path that aligns more closely with your goals. Interview a few.

    Good luck, and happy to connect.

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