How do I buy my next property?

Question

I have a unique situation of home equity I have built and am not sure how to make best use of the same to buy more properties. Here is the situation:

I own following 3 properties:
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1) My current residence - Current equity = 110K (Current market price - loan principal leftover).

2) My rental number 1 -   Current equity = 70K  (current net rental cash income = $4k per year .

3)  My rental number 2 -Current equity = 72K  (current net rental cash income = $4.5k per year .

Hence my total home equity = 252K

I also have $40K cash available that I can use for my next purchase. Per fannie Mae guideline I found out that I can qualify to purchase one more home as a rental based on my my current income/expense ratio.

How do I best make use of my equity for my next purchase? Current interest loan I have on each of the properties is lowest currently available in the market, hence I suspect refinance may not be a good option. (feel free to advise me any options here).

Maybe I should consolidate all 3 current loans into one?
Any suggestions here?
Thanking in advance for all the valuable guidance.

Matt Devincenzo · Answer

John Santos what are the home values? I ask because that will definitely have an impact on you LTV, and what is the rental PP you would be looking at again to know how much money you have to come up with.

Steve Babiak · Answer

Here is a thread where I have done example HELOC calculations, so you can get an idea of how much you might be able to tap:

http://www.biggerpockets.com/forums/48/topics/85498-question-for-those-who-have-used-a-heloc-to-invest

Assuming your terminology of "Local leftover" and "Leftover principal" actually mean "remaining loan balance", I suspect you won't get as much as you think.  Assuming you can get 90 CLTV on your residence, you can get a HELOC there that will allow you to borrow less than 70K.  For the two rentals, you might get a line around 30K each, assuming 80 CLTV.  Total of all 3 of those is around $130K.

John Santos · Answer

Thanks for the questions:
1) My current residence: Current market price = 410K. Leftover principal = 300K

2) Rental #1 - Current market price = 215K. Loan leftover = 145K
3) Rental #2 - Current market price = 215K. Local leftover = 143K

For my next investment, I wish to have $400 per month net rental income after off principal+interest+insurance+HOA fees. Current rental #1 and #2 are each yielding me roughly $410 per month.
Regards