Refinancing a rental property to get 20% down on primary home

[Adam Christopher Zaleski]

My wife and I currently live in a 2 bed/1 bath ADU (Accessory Dwelling Unit) on Kauai and pay $1500/month. We would like to purchase a single family home (3 bed/2 bath) with an attached ADU that is 2 bed/1 bath for around 500K. If we can come up with 20% down the total mortgage taxes and insurance should be around $2,150/month. The plan would be to live in the ADU and rent out the main house for $2200/month for the first 2-3 years. After that, we would eventually move into the main house.

We currently only have 32K in cash. We save about 1K/month, so it would take at least 5 years to come up with 20% down from just saving. However, we have 2 rental properties that we could refinance, so we have two options. I am leaning toward option #1.

My assumption is that we could get a 4.25% non-occupancy rate for either of the properties below.

Option #1:I am 5.7 years into the loan on the Florida house. It's currently worth 235K and I owe 76K at 4%. Current mortgage, taxes and insurance is $616/month and rent is $1700/month. We could pull out 105K and the new payment would go up to $1,111/month.

Option #2: I am 8.3 years into the loan on the Colorado house. It's worth 365K and I owe 112K at 4.75%. Current mortgage, taxes and insurance is $985/month and the rent is $2200/month. We could pull out 175K and the new payment would go up to $1,661/month.

Option #3: Refi both properties. Use 105K to buy a primary home and the extra 175K to buy another rental property. However, I don't see any value in buying rental property right now in my current markets. I think I would wait for the housing market to slow down.

[Harjeet Bhatti]

Why don't you purchase this PR with lower down payment 3% or 5%. This is PR you don't need 20% down payment unless you are trying  to avoid MI. In this case cash out from 2nd property because your interest won't go that high what you are paying right now.