Struggling to release equity on a debt free SFR worth $350k

[Colin G Murphy]

Hi everyone

At the beginning of 2013, two business partners and I pooled some spare company cash and formed an LLC to purchase a single family in a nice neighborhood of St. Petersburg Florida. We fixed it up a little and it has been rented to the same person for $2100 per month ever since. Our net rent is $1400 per month (insurance is quite high).

More recently we have been planning to purchase additional properties for flipping and for rentals and we decided to release equity on this SFR to help us do so. After going through all the motions with a local bank, we were offered a max of $75k, which came as a bit of a surprise considering the property is worth $350k with no debt.

The problem I guess was that the banks decisions were based solely on a debt service ratio of 1.3 and didn´t take into account the value of the property or our own personal income. We were hoping to release $200k or so, but that wouldn´t work for them as the mortgage repayments would be too high as a percentage of the net rent.

To summarize, it seems that our "problem" is that we want to release equity on a rental property that has strong appreciation (prices have risen a lot since we bought) but modest rental returns. 

Any ideas on how we can get $150-200k out of this property? I´d hate to have to sell it.