What is the best leveraging strategy with where I stand now?

[Patrick Crehan]

Ok, so long story short. I bought a single-family property and lived in it for a couple of years and I spent money and time fixing it up so I could transform it into a rental, which I successfully did. Before I moved out and bought my new property (which is my primary now), I refinanced the rental at a 2.6% which dropped my mortgage some so I could cash flow more substantially on the property (cash flow is $758 currently). The property was appraised at 124k and the mortgage left is 67k. I am kicking myself now because I realized that I probably should have done a HELOC on that property that I moved out of (that is now the rental). Now, I am sitting in my primary residence that doesn't have enough equity for a HELOC (even after minor updates) and I am learning after calling about 25 credit unions that it is not typical for them to offer HELOC for investment properties (there were a couple that said they would, but the stipulations were too much for my liking).

Overview: My investment property cash flows well. The last appraisal was 124K with a 67k mortgage. Cash flow=$758

My primary residence does not have enough equity for a HELOC

The reason that I want to get a HELOC is to acquire another investment property (but this avenue is looking weak)

The problem: I can't get the HELOC on the investment property.. or at least I don't know how to. Although I am open to other finance strategies that involve strong leveraging.

My question: If you were in my situation and wanted to move forward with acquiring a single-family investment property in the near future, how would you go about it? Are there HELOC options?

Location: Cincinnati OH


 
   

[Joe Splitrock]

@Patrick Crehan I would normally recommend more leverage on your rental property and less on your primary residence. Your mortgage interest on your rental property is tax deductible, but is not on your primary residence. There are also sometimes homestead protections for equity in your primary residence. That means in catastrophic situations like getting sued or filing bankruptcy, they can't touch your home. The equity in the rental property is not protected and they could force you to sell it. 

Given your current situation, refinance would be an option, but I don't think it is worth giving up that interest rate and paying closing costs. There are some lenders who will secure a HELOC against a rental property, so I would just keep looking.

Even if you can't pull equity out, at least you have good cash flow. Save that money and build up reserves for your next purchase.