I bought my first rental with HELOC but need creative Cash out Refi

[Jonathan Taylor]

Hi Everyone, 

First time here on Bigger Pockets. I had always wanted to buy my first investment house, to fix up and rent. Opportunity came up in June 2022, off market so I used my HELOC and some personal family loans to purchase the property for $1.1m. I have spent about $300k with a mix of credit cards and energy loans on complete renovation of the interior and exterior. I had planned to just cash out refi as rates were decent last year but now the banks I have called are around 8% for rental. My HELOC has gone from 2-9%, and its killing me monthly. Renovations are almost complete so I'm trying to see if there are ways I can hold onto it and rent it, or is there a way to 1031 it, or do I have to sell. Similar houses are only renting for $6.5k. There is a good size detached garage I could convert to ADU, but it would take time with plans and permits. I would guess that could bring in $2,500-3000/month eventually.

I've been bashing my head into wall wishing I had just financed it all a year ago. Anyone have advice? 
Thank you,

Jon

[Michael Daniel]

I'm no expert, but a side note I'm seeing the number of rentals in our market increase YoY.  I'm planning to have to lower the price of our rental later this year a tad when tenants are out. 

Others will be able to give better advice on creative strategies, financing ideas. ADU idea is interseting.

In my market (Bend, Oregon) I think a decent number of people are going to continue to try to rent first versus sell with old, low rates.  Two other homes in our neighborhood tried that at the same time as ours.  Our house was better.  We got the renter, one owner had to sell and the other sat vacant for months.  We'll see how summer goes this year and if inventory is eaten up again.

I think Erik's comments are right on and think about the trade off of bleeding for a while vs cashing out.  Key notes in your post were "first investment property" and "personal family loans".  I'd personally think long and hard about taking the current equity "win".  It would obviously then be a win for you and those who backed you.  And hey, any win is a good one first time around.  Remember, you can base your next one off the current climate.  In the end, if prices went down a bit more and rent followed how long could you "bleed" before rates did?  If a long term goal of cash flow off this property is the only objective, you have to prepare for that.