Term Loan, Line is Credit, or both?

[Daniel Kent]

Hi All!

Quick financing/leverage question...

My LLC owns some rental properties free and clear, and in talks with banks to do a cash out refinance. We are pretty conservative and only want to leverage about 60% of the portfolio, to have cash available to purchase our next property. Considering two options-

1. Get 1 loan - a traditional Cash Out refinance on 60% of the portfolio

2. Get 2 loans - a traditional cash out on 40% of the portfolio, and then a second line of credit for 20% of the portfolio

Since we don’t have the next property lined up yet, the two loans will save us on interest payments, although there will be double the closing costs. And we can leverage the next property to pay down the line of credit, and then have that as a future emergency fund.

I appreciate and input!