Best use of my money, equity, and future RE Investing goals

[Kristy Farmer]

Fellow Real Estate Investors-

I really need help at the best use of my money, equity, and future real estate investing goals. I have a full-time job and financing shouldn’t be an issue. I also have a great to excellent credit score.

Here's the scenario and my goals:

This year I listed a rental property (previous primary residence) house for sale in Galveston, Texas 77551 and it didn't sell, Property 1 below. I've decided to keep it and rent it. My tenant will be renting this house in January of 2020 for a one year lease of $1,700/month. I am currently living in this property until I find the next house-hacking opportunity this fall. I can always go back to my duplex that’s a vacation rental in the off-season if necessary. I am looking for good deals on Galveston Island this fall and winter.

My initial goals were the following:

Property 1 (LTR). To refinance into a 30 year note for a small amount of cash flow. This property has 3 policies: homeowners, windstorm, and flood. It's in an AE zone on the new FEMA maps.

I also wanted to refinance solely to remove escrow. It's had 20% equity for a while now, but the servicing company has been a huge pain to deal with and now that I kicked a couple of payments down the road when I asked for the 3 months due to Hurricane Harvey, they have stated I MUST escrow for the life of the loan.

The mortgage is roughly $140K and it's appraised on the county tax rolls for around $215K, which is what I believe it would also appraise for with appreciation and some minor updates that I've done over the years, perhaps a bit more, $225k.

Property #2 (now a STR – 2 units). Galveston, 77550 (I obtained this property as a primary residence under an FHA in late 2017): I tried to find options for a refinance on this duplex that is under an FHA loan. I've converted both units into short term vacation rental units. It's been rehabilitated a lot and more improvements to it. With what I've put into it in the last two years it should have no problem being evaluated at 20% now of equity. I roughly think it would be worth around the $330 to $340 k range, possibly valuated at $350k. I have an Airbnb income statement that I can provide. This STR is new and is self-supporting. The upstairs unit is 1 year old and the downstairs unit was available in August this year.

Now that I've done some research, there appears to be a lot of money involved in the refinances and I don't have enough equity to make it worthwhile. My intentions were to reutilize the FHA loan at 3.5%. Now, I'm thinking of taking a LOC on the first property or borrowing from my 401k for a 20% down payment. I need a place to live this year and it needs to be a 2 bedroom. I have a roommate that pays me rent that will be coming with me. He's my partner and working for me on this house-hacking hop. Any advice would be appreciated.

Thanks,

Kristy