Let's Ask the Hard Questions: Equity Rich and Cash Poor

[Keegan Wetzel]

Hi BP!

This is my first post ever...so it gets a bit vulnerable at the end.

I'll keep this as short as possible, but I hope this is helpful to many.  Through communities like this, I think everyone eventually finds themselves in the same scenario (esp. if you have a lot of low fixed-rate debt from the last few years) of being equity rich and cash poor.

I certainly am, and I feel so stuck.  I quit my full time W2 job this past year, and we went full-time on the real estate and mortgage business we created 4 years ago.  Because of this, Conventional Full Doc loans are probably off of the table for a little while.

I've taken HELOCs against every property that I can and I have business lines of credit available as well - total credit available is probably $500k. And I am building and developing ADU's as fast as possible in San Diego. We own 16 units in San Diego and are building 4 ADU's in 2024 and 4 more ADU's in 2025.

Problem(s):

1) I want to buy a primary home and start a family soon, but all of our cash is locked up in equity in real estate (ok, not all of it, but like 65%). So if I take my cash on hand to buy a primary home, then it slows my construction scalability. I think primary homes are going to run up in price massively over the next 2-3 years, and I want to have a place to really call home and be a part of that market share for the next couple of years.

2) Construction lenders want to refinance my entire project to build...but I have 3-4.5% debt on the projects and I just need to get cash to complete my builds, so that I can refi or sell and 1031 on the backend...and I will greatly deplete my cash (and have my lines of credit already obligated on other projects) if I buy a primary house.

Solution(s):

1) Primary home mortgage rates for asset depletion and P&L loans (which I have qualified so far) are like 9%.  On a $2.25M purchase that is a $17,000 a month mortgage...ouch!  Are there better first-lien loan products available? We could make it happen at 7%-7.5%

2) Construction lending - I have scraped builds together so far with multiple HELOCs and lines of credit, but to continue to scale I think I need better products or relationships with lenders.  Do construction products exist that ONLY finance the build portion of a project? Or do better lines of credit exist that could cross-collateralize my equity that is locked up in other properties?

Thank you in advance if you made it this far!  Would love some feedback and direction/guidance!