Refinancing woes in St Louis

[Mackal Smith]

I bought a duplex in need of rehab for 49K using my $63,000 line of credit. I paid cash from the LOC then painted, reworked kitchens and baths, turned the upstairs unit from 1 bedroom to 2 by adding a closet and closing off 1/2 a very large family room. Total out of pocket was about $65,000 (so the entire LOC and a couple of thousand to boot). The idea was to refinance and move on to the next project keeping this one as a cash flowing rental.

When I evaluated comps before starting, it looked like $70K to $75K appraisal should be achievable. Since my bank would loan 80% of appraised value I was looking at a refi of $56,000 to $60,000. That would mean by adding a little money I could get my LOC back and be able to move on.

I hit 2 problems... 1st once I actually got around to getting the refi started, banker told me that it wasn't just the APPRAISED value, it was 80% of the lower of APPRAISED value or COST of Property + IMPROVEMENTS. Since everyone that rehabs (at least I think) expects that the cost of the property + the improvement costs does not equal value. The simple fact that I have done the work to get it back to NICE means I have built in equity... ok whatever, I'll just cook the books a little to get my costs over the appraised value. I don't like doing it, but it is easy enough.

The second problem (and worse problem!) is that I actually paid extra to get the appraiser to walk through the property rather than just pull comps and drive by because my lender said that the appraisals were almost always higher when they did that... Well,the appraisal came back at $55,000 which means at most my lender will refi $44,000. I was more than happy to add a few thousand to get my LOC back up, but $20K is much more than i had planned.

I'm weighing my options here but also looking for advice. I truly believe (and based on recent sales of comparable properties) I think I can get between $68K to $72K if I sell. This would make me a small profit, but my goal has been to keep the property. I could hold it as -is for a year or so. The LOC is good for 2 years and since I'm paying interest only on the loan, I could add a few hundred per month toward principal and then try the refi again next year. (Of course this would preclude me from doing another project since my LOC is now tied up). And I guess my third option would be a private money loan. I have not done one before even though I have met many folks that would be likely private money investors if I asked.

I guess I'm looking for a little advice. What do you think? - Just a little background. I have 15 other units that are cash flowing well myself and I own 5 others 50/50 with a partner. This is the first one I have bought and did these more extensive renovations to so basically this is my first "flip" to myself. any advice is welcome...