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

Question

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:

• Keep both first mortgages. Those rates are too good to give up.
• Qualify on the properties’ rental income, not my personal DTI. I’m saving that for a future HELOC on my primary residence.

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

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?

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

Ashish Acharya · Answer

Kris, with those two first mortgages at 3.2% and 4.2%, I would be very hesitant to refinance either property just to pull the equity out.

If you can find a second-position structure that works, I'd compare the cost of that capital against the return you're realistically expecting from the next flip. The important number isn't just the 9.7% rate, but whether the additional capital creates enough value to justify the cost and risk.

One thing I'd also look at from the tax side is what you're using the borrowed funds for. Since you mentioned the money would fund an add-value flip, I'd keep very clear records tracing the proceeds from the rental properties into the flip. The interest treatment can depend on the actual use of the borrowed funds, so I wouldn't automatically treat all of it as a rental expense.

And if you're doing flips with enough frequency and profit, I'd also revisit whether the flipping activity should be structured separately from your long-term rental portfolio.

Personally, I'd rather pay a higher rate on a clearly profitable short-term project than give up a 3.2% long-term mortgage unnecessarily.

How much equity are you actually trying to pull out for the next flip, and what's your expected hold period?

Feel free to DM me. I'd be happy to share a few resources that might be helpful for you.

Marc Del Priore · Answer

Hi Kris, keeping those low first mortgages in place makes a lot of sense, so a second position option is worth pricing before you refinance them away. On two rented fourplexes, lenders for a DSCR style HELOC or commercial second will size mainly off the rent roll, total combined leverage against the roughly $500K value, and reserves, and your long hold and professional management help that picture. With only about $105K owed, you have equity cushion, but terms vary a lot on whether they will qualify you purely on rental income and how much they will advance in second position. We are Royal Partners and we arrange this kind of financing through our lender network. If you want, DM us the rent per property, current statements, and how much you want to pull and we will give you straight numbers on what pencils.

Devin Peterson · Answer

Nice position to be in with those rates. A few thoughts on your options:A cash-out refi (like the 7.25% commercial offer) replaces your 3.2%/4.2% firsts, usually the wrong trade when you only need a slice of the equity. Keeping the firsts and adding a second lien fits your goal better.A standard residential HELOC on an investment property generally qualifies on your personal income/DTI, which you want to save. The alternative is a DSCR-style HELOC or second-lien product, which qualifies mainly on the property's rental income versus the payment and leaves your first mortgages untouched. Those come from non-bank/non-QM lenders, so your local banks may not offer them. Rates usually run higher than a bank HELOC, so compare against the 9.7% offer and look at draw period, fees, and whether the lender allows a second behind your current first (check your first mortgage docs too).One loan per building vs. a blanket across both: separate liens give flexibility to sell or refi one later, while a blanket cross-collateralizes both. Worth pricing both.Hope that helps, and good luck on the next flip!

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

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