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 · 8 posts · 4 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

Update:

I want to thank everyone for reaching out and lending very thoughtful advice. I do read and listen to all of it.

It sounds as if my initial ideas for lending were on the right track. I began by calling up multiple investor, friendly banks to try and find a DSCR HELOC product, but after talking to about six banks, I couldn't find anyone who offered it or if they did I didn't meet the minimum loan amount. But judging off of the comments, it sounds like they do exist along with other investor, friendly HELOC products.

.

My second plan of action was a commercial second that tied together both the properties or just one for each property. Again it sounds like all the banks that I talked to just don’t offer investor friendly products. A lot of you have asked me to reach out to you for more advice and recommendations on where/ who to go for lending and I plan on following up on those comments. Thank you so much!

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Alexandra KempBusiness Member
Lender · Member since 2026 · 12 posts · 9 votes
13h

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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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 679 votes
    21h

    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!

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  • Marc Del Priore
    Lender · Philadelphia, PA · Member since 2024 · 55 posts · 16 votes
    17h

    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.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    17h

    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.

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    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 8 posts · 4 votes
      3h

      Hey Ashish, thanks for such a thoughtful reply. You put words to exactly what I’ve been wrestling with: I’d rather pay more on short-term money than give up a 3.2% loan.

      To answer your questions: I’m looking to pull about $150K, enough to cover the down payment, rehab, and holding costs on a flip around $400K. My expected hold is 6–9 months per flip, and I’d likely do one or two over the next two years before paying the line back.

      Your point about tracing the funds and keeping the flips separate from the rentals is something I hadn't thought through. Would you suggest setting up a separate LLC for the flipping side before I start? I'd also really appreciate any resources you're willing to share, like good places to find a DSCR HELOC or commercial second!

      Thanks again,
      Kris

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  • Ryan BakerBusiness Member
    Lender · Strongsville / Cleveland, OH · Member since 2026 · 124 posts · 32 votes
    14h

    Keeping those 3.2% and 4.2% first mortgages makes a lot of sense. When you don't want to touch the firsts, the usual routes are a HELOC or a closed-end second on each fourplex, or one second lien that covers both properties. Some lenders will do these on 2-4 unit rentals for out-of-state owners, and with about $500K of value against roughly $105K owed you have real room to work with. I do lending and can walk through which structure fits best for you. Give me a call at 330-548-3340 and we'll run the numbers.

    [email protected]330-548-3340
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  • Stephen Foster
    Member since 2026 · 24 posts · 5 votes
    14h

    Kris, keeping those 3.2% and 4.2% firsts is the right instinct. With roughly $105k owed against about $500k of value, the clean path is a second-position product that qualifies mainly on the rent roll, not a cash-out that replaces the firsts.

    A few practical notes from a mortgage broker who does investor seconds and DSCR-style lines:

    1. Price it two ways: one loan per fourplex and one blanket across both. Separate liens keep you flexible if you sell or refinance one building later; a blanket can sometimes get better leverage but cross-collateralizes everything.

    2. Local banks often stop at "we don't do commercial seconds." Non-bank / non-QM lenders are usually where the DSCR-style HELOC or fixed second lives. Ask each one: max combined LTV in second position, whether they use market rent or in-place leases, draw vs full-fund, prepay, and whether your current firsts allow a junior lien.

    3. Before you lean on the full-draw offer, build a one-page package: rent roll by unit, trailing deposits, taxes/insurance, payoffs, and how much you actually need for the next flip. Lenders move faster when the ask is a number.

    4. Confirm in writing with each first-mortgage servicer that a recorded 2nd is allowed.

    If you share the rent per building and the amount you want for the flip, it's easier to tell whether separate seconds or a blanket is the better fit.

    – Stephen

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    • Kris Lawhead
      OP
      Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 8 posts · 4 votes
      3h

      Hi Stephen, thanks for the detailed breakdown. Pricing it both ways, one lien per building versus a blanket, is exactly the comparison I needed.

      To answer your question: each fourplex brings in $3,000/month ($750/unit × 4), and occupancy has been near 100% for years. I’m looking for about $150K for the next flip. Current balances are about $60K on one and $45K on the other.

      I called probably 4-5 banks that say they do DSCR HELOCS (this was from a google search) and the answer was always, we don't offer that product and you dont meet the min loan amount for a DSCR.

      I never thought about reaching out to the first lien holders, I called them about seconds, but never asked if someone else could take that position.

      Thanks again,
      Kris

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  • Rickey Shneyder
    Lender · Milwaukee, WI · Member since 2026 · 15 posts · 4 votes
    13h

    Kris, one thing that may explain the local-bank pushback: a lot of community banks treat a second lien behind an existing first as outside their credit box, even when the first is current and the buildings cash flow. That usually isn't a no on you; it's a product gap. The products that actually match what you want (keep the 3%/4% firsts, qualify mainly on rents) tend to sit with non-bank lenders that underwrite 2–4 unit rentals on a DSCR or similar rent-roll test.

    Two specifics that are easy to miss when you're comparing the offers you already have:

    1. A bank-statement HELOC still ties qualification to your personal income. That fights your goal of saving personal DTI for a primary-residence HELOC later. If a lender says "bank statements," ask whether the approval is property-income based or personal-income based.

    2. For flip capital, a full-draw 9.7% second means you start paying interest on the whole advance the day it funds. If the money will sit unused between flips, a draw-style second or HELOC on the rentals usually costs less in real dollars even when the stated rate looks higher, because you only pay on what you've pulled.

    With about $105K against roughly $500K, you have equity. What matters next is each lender's max combined LTV in second position and whether they use in-place leases or market rent. Price one second per building and one blanket, then pick based on how much you actually need for the next flip and whether you might sell one fourplex later.

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  • Nyisha Walton
    Lender · Houston, TX · Member since 2026 · 113 posts · 34 votes
    13h

    Ten years holding two fully rented fourplexes with that much equity is a great spot to be in, and protecting those first mortgages is the right instinct. One thing worth knowing: there are investor lenders who do business-purpose seconds or a blanket line across both buildings and underwrite off the rents, so you are not stuck choosing between a bank second and a full refi. This is what I do, and I work with a network of lenders who handle seconds like this, so message me and I'll help you map out which structure fits.

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  • Alexandra KempBusiness Member
    Lender · Member since 2026 · 12 posts · 9 votes
    13h

    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.

    1Reply
  • Adam Summerer
    Lender · Franklin, TN · Member since 2026 · 127 posts · 36 votes
    12h

    Before you shop too much further, pull the note and mortgage on both firsts and check for a clause that limits or prohibits junior liens. That's a big reason local banks say no to seconds, and it's the first thing a second-position lender's attorney will look at. Second thing: there are private and business-purpose lenders who will sit in second behind a bank first, and some will cross-collateralize both buildings into one line, which is usually cleaner than two separate HELOCs. With only ~105k owed on ~500k you've got a lot of room even at a conservative combined LTV. Also worth running the math on refinancing just the smaller-balance building and leaving the other first alone, sometimes that beats a 9.7% second on blended cost.

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  • Divin KanyamaBusiness Member
    Accountant · Seattle, WA · Member since 2025 · 671 posts · 283 votes
    11h

    @Kris Lawhead From an investor’s perspective, I’d start with how much the flip actually needs and how you’ll repay it if the sale takes longer than expected—not which loan offers the biggest check. Keeping those first mortgages would be my starting preference, but I’d compare the total dollar cost over the expected holding period rather than rule anything in or out on rate alone.

    I'd explore a rental-income-qualified second or line on just one fourplex first, if that provides enough capital. Some lenders advertise DSCR seconds and lines, but I'd specifically confirm fourplex eligibility in Alabama and how they count both mortgage payments. I wouldn't assume "bank-statement" means property-income-only qualification. And before relying on this to preserve your future primary-home HELOC capacity, I'd ask that prospective lender how it would treat the new obligation.

    The 9.7% second deserves a closer look, not an automatic yes: what are the fees, prepayment terms, and cost of taking the full draw before you need it? I’d compare that with financing secured by the flip itself. I’d also want a clear benefit before tying both rentals into one loan—my priority would be keeping a delayed flip from putting unnecessary pressure on the rental portfolio.

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  • Dan BeaulieuPro Member
    Lender · Knoxville, Tennessee (TN) · Member since 2016 · 427 posts · 672 votes
    11h

    Kris, you're thinking about this the right way. Don't touch those firsts.

    Quick math on why the 7.25% refi is worse than it looks. Say you want $100k out. Refi both at 7.25% and your new loan is about $205k ($105k payoff plus your $100k). That's roughly $14,860 a year in interest. Right now you're paying somewhere around $3,900 a year on the $105k at your blended 3.7%ish. So the extra $100k is really costing you about $11k a year... that's an effective rate of about 11% on the new money, not 7.25%. Plus closing costs on two buildings. The 9.7% second is actually the cheaper money here even though the number looks scarier.

    The bigger thing I'd push on tho is how much you actually need. Most folks pull enough equity to fund the whole flip, but you can let a rehab lender carry most of it and only use your equity for the gap. I'm a lender, fwiw, so I see this one a lot.

    Say the flip is $150k purchase, $40k rehab, $260k ARV. A typical hard money loan at 90% of purchase and 100% of rehab is $175k, which is about 67% of ARV so it fits most lenders boxes. Your cash is the $15k down, about $3,500 in points, $4k closing, and call it $12k in interest and holding over six months. That's about $35k, and I'd round up to $45k so you have a cushion when the contractor finds something behind the drywall (he will).

    $45k on a 9.7% second is about $4,365 a year. $100k is $9,700. Same flip, less than half the carrying cost, and your rentals stay a lot less levered if the flip runs long.

    What's the flip you're looking at? Post the numbers and I'll take a look.

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  • Steve Waller
    Lender · Houston, TX · Member since 2026 · 105 posts · 22 votes
    10h

    Kris, at roughly 21% loan-to-value you have plenty of room. The question is who will sit behind those two first mortgages. A few routes I'd compare:

    1. A business-purpose second lien on each building. These underwrite on the rents, not your DTI, but they price well above a first and usually cap combined loan-to-value around 70 to 75%.

    2. A cross-collateralized bridge on both buildings for the flip itself. It's short-term, paid off when the flip sells, and the firsts stay put.

    3. A cash-out on just one fourplex, keeping the better of the two rates.

    Either way, check that both first mortgages allow subordinate financing before you apply. Some older notes have a due-on-encumbrance clause. How much do you need for the flip?

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  • Connor MaynerBusiness Member
    Lender · Sarasota, FL · Member since 2026 · 11 posts · 4 votes
    9h

    Hey Kris,

    There are two ways we can approach this.

    First, we’ll quote you the HELOAN options (second mortgage) so you can see what your combined monthly payment would look like with both mortgages in place.

    We’ll also quote a first mortgage cash-out refinance so you can compare the monthly payment and total interest paid against the first and second mortgage structure.

    This will give you a clear picture of both options and allow you to determine which approach makes the most financial sense for you as an investor.

    I’m the owner of Ocean Coast Mortgage, and we specialize in investment-purpose lending. We’ll be able to walk you through the numbers and help you determine the best path forward.

    Feel free to reach out if you need anything in the meantime.

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  • Jiao Liu
    Lender · Houston, TX · Member since 2026 · 56 posts · 14 votes
    8h

    Hi Kris — keeping those 3.2% and 4.2% firsts in place is the right call. I can look at second-position options on rented fourplexes like this — a commercial line or a DSCR-style second priced off the rental income, rather than a refi. A few quick things: what are the two properties bringing in monthly in rent, and how much are you looking to pull out? Also the annual taxes and insurance on both, your credit score range, and whether you hold them in an LLC or personally — that completes the picture, and with those I can give you a straight answer on whether the numbers work.

    Jiao Liu, Eirvale Financial Services

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  • Dan Duenas
    Lender · Irvine, Orange County · Member since 2026 · 69 posts · 36 votes
    8h

    Don't touch those firsts. Refinancing away 3.2% money to pull cash is the most expensive way to fund a flip — you'd be trading cheap debt for expensive debt on the whole balance, not just the cash you take out.

    The tool that fits here is a 2nd-position investor HELOC. It sits behind the 3.2% and 4.2% loans, so those stay exactly where they are. No appraisal, you draw only what you need for the flip, and it qualifies on the rental income / bank deposits rather than your personal DTI — that's the whole point of the investor version.

    On your numbers: $105K owed plus a $250K line is about 71% of a $500K value, which is in range for a 2nd on an investment property. Whether it pencils comes down to the DTI check on the combined payments — debts can be paid off to qualify, and bank-statement income often comes in higher than paper income, so it's worth running rather than guessing.

    A DSCR cash-out refi exists too, but it's a first-lien refi — it would replace the cheap loans. Only makes sense if you were refinancing anyway. For what you described, the 2nd keeps the math working.

    Happy to run your numbers if you want a second set of eyes — Dan

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7h

    I have a client using a investment property HELOC on a 3 unit to buy a 4 unit that closes tomorrow actually and the check from the HELOC is already in his account so was all legit. If you want the banks contact feel free to PM me. The rate is 9%.

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  • Neeraj Diwan
    Lender · Stamford, CT · Member since 2026 · 52 posts · 8 votes
    7h

    @Kris Lawhead Before you pull equity off those 3.2% and 4.2% firsts, we can fund the next add-value flip itself. We place fix and flip loans on 1 to 4 unit homes, up to 90% of cost and 100% of rehab. When you have the purchase price, rehab budget, and ARV, I'm happy to run a quick funding review so you know the cash gap without touching the fourplexes.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    7h

    Hi Kris,

    How would you structure it?

    You can either structure a 2nd position DSCR loan or a DSCR HELOC. A fixed second might work in your favor if you do not plan on repaying the principal balance ASAP and rather use the rents to pay off both liens over time. A HELOC will work mainly on flips for other properties or BRRRRs. Keeping a line of credit open will help you scale faster.

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  • Adam TafelBusiness Member
    Real Estate Agent · St. Paul, MN · Member since 2017 · 599 posts · 403 votes
    6h

    I'd be careful not to overvalue low interest on $100,000 in debt. Sure, it's a warm and fuzzy feeling, but depending on your broader financial situation, it might be less monumental than you are thinking it is. With that amount of equity, I would be surprised if you can't find a bank willing to lend at least 75% loan-to-value, which would free up a few hundred thousand.

    Are these buildings in good shape? Do they make you money? Are they assets you could see yourself keeping for another decade? These are the questions I would be asking myself.

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  • Muyees Ayilara
    Lender · Boynton Beach, FL · Member since 2026 · 170 posts · 70 votes
    5h

    Kris, you are doing the right thing by keeping those first mortgages. I would not touch a 3% and a 4.2% rate to pull equity. You would lose too much on the refi.

    For what you are trying to do, I would look at it like this:

    1. Do not refi the firsts. That 7.25% commercial refi you were offered sounds good until you lose the 3% and 4.2% forever. Keep them.

    2. A second lien is the right tool here. A DSCR second or a bank-statement second on each property lets you pull equity and keep the firsts in place. Yes, the rate is higher - that 9.7% fixed second you were quoted is normal for a second - but you are only paying that higher rate on the equity you pull, not on the whole $500K. That is the math that matters.

    3. If you can get a DSCR HELOC in second position, that is even better for a flip. You only pay interest on what you draw, and you can reuse it. The problem is what you already found - a lot of banks have minimum loan amounts and they will not do small seconds on investment properties.

    4. A blanket commercial second across both properties can work if you need a bigger amount to make it worth the lender's time. It is one closing, one payment, and it keeps both firsts intact.

    Since you want to qualify on rental income and not your personal DTI, ask specifically for a DSCR second, not a full-doc HELOC. Have your last 12 months rent rolls and leases ready. That is what the lender will underwrite.

    If you want, tell me how much equity you are trying to pull on each building and I will tell you if a second on each one or one blanket second makes more sense for your next flip.

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    1h

    Back in the day banks with a first would do a cash-out blended refi to keep the customer’s business. You’d be swapping your current first position liens for new ones with rates lower than new firsts but higher than your current rates. Probably get a better rate with the builds cross-collateralized.

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