Cash for down payments

[Devang Patel]

I am a newbie real estate investor and in my first year have purchased, rehabbed, and established steady cash flow on 4 units.  I want to continue adding units and my ultimate goal is to get to 12.  However, I am running out of cash for the 20% down payments.  For my owner occupied home, I have 33% equity plus value of the home per zillow's zestimate (which i know is not entirely accurate) is 21%.  I am trying to decide on whether my best course of action is:

1.  Sell my home, take back equity plus gains to purchase more units while living with family for short period of time.  

2.  Cash out refinance

3.  Home equity line

I am looking to hear what people feel would be my best course of action based on the above described situation.  I appreciate all of the assistance in advance.  Thanks again!

[Jesse Waters]

I think Heloc's can work for many, I haven't used that option, mostly because I invest with a business partner & that could complicate the situation a bit.  Nothing that our accountant couldn't advise us on, however...

We ran into the same problem, 25-30% down payments get expensive. A few months ago I had to swing by my bank to sign a new business signature card. While I was in I asked to talk with the commercial lending guy. After a bit of discussion, I walked out with a new business plan. The bank was offering commercial loans on rentals (as long as we had 5+ units in the package) at 85%LTV or 15% down. Having a good bit of equity in our current rental portfolio, we set out of find enough properties to eat up the rest of our equity. We started with 2 quads & 1 SFR, we now have 3 more quad's under contract and should be closing in August.

This should put us in a position where we don't have to use personal funds for down payments going forward, unless we want to, increase our cash flow & will not cost us anything out of pocket to close. We are looking at a final LTV at 82 or 83%.

So, my advise, check out some of your smaller local & regional banks/credit unions.