Tapping into Equity - HELOAN vs Sell

[Derek Lee]

BP Community, thanks in advance for your input. I would like to get your thoughts on the most efficient way to tap into equity. 

I purchased a SFH and Duplex back in 2020. Both properties are currently at a 50%~ LTV. I want to use this equity for a down payment on future value-add projects.

Options:

1. HELOAN (2nd Position) - A Lender is quoting 10.5% fixed, 30 year term, 75% CLTV. Which comes out to $1200 P&I, this would wipe out the $800 of cash flow from my first properties. My current DTI is at 15%~ so there's a buffer to cover the negative cash flow. The interest rate hurts, but does this option make the most sense if it's offset by the forced appreciation in the next projects?

2. Sell - Would prefer to avoid this to keep my low interest rate (3.3%) and avoid fees/taxes. 

Let me know if there are other options I should consider.

[Steve Vaughan]

Quote from @Derek Lee:

BP Community, thanks in advance for your input. I would like to get your thoughts on the most efficient way to tap into equity. 

I purchased a SFH and Duplex back in 2020. Both properties are currently at a 50%~ LTV. I want to use this equity for a down payment on future value-add projects.

Options:

1. HELOAN (2nd Position) - A Lender is quoting 10.5% fixed, 30 year term, 75% CLTV. Which comes out to $1200 P&I, this would wipe out the $800 of cash flow from my first properties. My current DTI is at 15%~ so there's a buffer to cover the negative cash flow. The interest rate hurts, but does this option make the most sense if it's offset by the forced appreciation in the next projects?

2. Sell - Would prefer to avoid this to keep my low interest rate (3.3%) and avoid fees/taxes. 

Let me know if there are other options I should consider.

Option 3 - save organically and get creative with sub2, assumption and / or seller-financing for your next acquisition. 

Not selling a great asset financed at 3.3% and certainly not borrowing at 10%.