Rental Property Investor · Coeur d'Alene Idaho · Member since 2016 · 9 posts · 7 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:
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?
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!
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.
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.
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!
First, congratulations on building and maintaining a solid rental portfolio over the past 10 years! With approximately $500K in property value and only $105K in outstanding mortgages, you've built substantial equity.
Based on your situation, I would strongly recommend holding on to your existing first mortgages at 3.2% and 4.2%. Those are excellent rates, and refinancing into a DSCR cash-out loan at today's market rates would mean replacing that inexpensive debt with significantly higher financing. In my opinion, that would be a shame, especially when your objective is simply to access equity for your next investment.
Here's another option worth considering: A HELOAN (Home Equity Loan).
A HELOAN is similar to a HELOC (Home Equity Line of Credit), but there are some important differences.
HELOC – Home Equity Line of Credit:
Provides a revolving line of credit secured by your property's equity.
Allows you to draw funds as needed, up to your approved credit limit.
Typically carries a variable interest rate.
You generally pay interest only on the amount you've borrowed.
Can be useful when you need ongoing access to capital for multiple investment opportunities.
HELOAN – Home Equity Loan:
Provides a lump-sum loan based on the available equity in your property.
Typically offers a fixed interest rate and predictable monthly payments.
Can be structured as a second lien, allowing you to preserve your existing first mortgage.
May be an excellent solution when you know how much capital you need for your next investment.
Depending on the program, qualification may be based on the property's rental income and cash flow rather than traditional personal debt-to-income calculations.
Why I believe a HELOAN may be a good fit for your situation:
Your properties are fully rented, professionally managed, and have substantial equity. Rather than refinancing your existing mortgages, a second-lien HELOAN could potentially allow you to unlock a portion of that equity while keeping your favorable first-mortgage rates intact.
The key will be finding a program that accommodates investment properties, four-unit buildings, and second-lien financing while meeting your desired qualification requirements.
At JCREIG Capital Funding, we can help you explore HELOAN financing options and evaluate whether your properties qualify based on the available equity, rental income, and overall loan structure.
I'd be happy to review your scenario, run some preliminary numbers, and see what options may be available without disturbing your existing first mortgages.
Sometimes the smartest financing strategy isn't replacing the debt you already have — it's leveraging the equity you've built while preserving the financing that continues to work in your favor.
Kris, Ashish and Rickey framed it correctly: protect the firsts and price the second on property income. The math supports them. Your $105K firsts blend to 3.63%. At a 25-year amortizing constant near 6.1%, annual debt service is about $6.5K against $72K gross rent. Even at a 50% expense ratio, NOI is $36K, so first-lien DSCR is roughly 5.5x. A $150K second at 9.7% interest-only adds $14.6K, total debt service $21.1K, DSCR about 1.7x. That clears a 1.25x floor. Combined LTV is 51%, well inside a 65% second-lien box.
Devin and Stephen are right on structure. One lien per building preserves optionality; a blanket cross-collateralizes. The 7.25% cash-out refi is a false economy. Replacing $105K at a 3.63% blended rate with $255K at 7.25% creates roughly $15.6K of incremental annual debt service on the $150K you need, an effective 10.4% cost, while extinguishing the cheap firsts. The 9.7% second is cheaper carry and keeps the asset-level debt constant low.
Rickey's draw point is the real proof. A full draw starts $14.6K of annual interest immediately. A draw-style line sized to the flip's S-curve, with average outstanding near 60%, carries about $8.7K. On the flip, $150K against $400K all-in is 37.5% LTC; against a $500K ARV it is 30% LTARV. Horizontal infra per pad is zero here because both assets are stabilized vertical improvements, so no development carry. What is your actual all-in basis and ARV, and will the lender commit a draw schedule before you close?
Hi Kris, keeping those 3% and 4% firsts is the right call if you only need a slice of the equity for the next flip. Local banks often won't do investor seconds, so the products that usually fit are non-bank DSCR-style HELOCs or second-position loans that qualify mainly on the rent roll rather than your personal DTI. I'd price one loan per building versus a blanket across both, because separate liens leave you free to sell or refi one later. Before you lock anything in, compare the full cost of the second (fees, draw rules, and how much they'll actually advance behind your firsts) against what you expect the flip to return, and confirm your current first mortgages even allow a second lien. Roughly how much are you looking to pull for the next deal?
