Equity Loan or HELOC on Rental property

[Molly Morlino]

So here's the story...

My parents own 10 acres in Kyle, TX. On it they have built 5 rental homes, a 10 unit storage building (it accompanies the rental homes) and a 2 car garage for personal use. My husband and I have build 2 rental homes on the same property.

They are in their 70s now and would like to deed the property to us. We would take care of the property, pay for all repairs, utilities, etc. - It would in every way be OUR property and our responsibility. Currently the 5 homes are renting for $6400/mo. Our two houses are renting for $2465/mo.

We would pay them a $5,000 per month stipend. I realize that the rental income - after property taxes, income taxes, expenses, etc would barely cover this $5,000 per month. But, the real financial gain, in our opinion, would be that we would now own - with no debt or mortgage - a property that would appraise at around $1 million.

We would like to take out a Home Equity Loan on this property for $175,000. This would be enough to build five more of our rental homes. They would be identical to our first two homes. We can build them for $35k and rent them for $1195 base. We know this because we've already built two of them.

Basically I'm wondering this: Would a Home Equity Loan on this property be possible?  Has anyone had any success pulling equity from their rentals?  If so, what banks were you happy with and what were the terms?  We could pay it back in 48 months or less.

With the exception of the mortgage on our primary home, we have zero credit card debit (lots of available credit, but no debt) and no car loans.  Our credit scores are both in the 800s.