LTV - What's an Extra 10% Worth?

[Lauren Schifferle]

I'm refinancing my primary residence (2-unit, owe $30k), assessed value is $168-180k, that I plan to hold indefinitely. I don't understand how to evaluate the benefits and marginal cost of an additional $30k on hand, and if this is the best option for securing $30k.

Details:

I have an occupied SFR rental (cash purchase just closed, no loan, plan to flip early 2020) and am closing on a 2-unit fixer-upper (cash) at the end of the month, and need the cash out of my primary to fix this up (est. $70-90k) and then plan to do a cash-out refinance. A comparable house sold on the block for $174k in worse condition after the initial assessment, the company won't allow a reassessment, I think $180k is reasonable. No personal debt, 750 FICO. I am evaluating two financing options (cash out value subtracts closing costs and HELOC payoff:

• 75% LTV @ 4.99%, assessment $168k; $828 monthly payment, yields $90k cash out.
• 85% LTV @ 5.25%, assumed assessment of $180k; $1,166 monthly payment with PMI for 10 years, then drops to $1,075, yields $120k cash out.

Goal:

I aim to buy more properties to buy & hold, and am only flipping because a great deal came up. In my market $30k can purchase another fixer-upper. The marginal value of that extra $30k is high. What am I not considering, how do I evaluate this value/cost, are there better ways to have cash on hand? The lower loan of $90k is my estimated reno costs, if they end up higher I do have a 401k I could tap.