Seeking Advice on Leveraging Equity for Portfolio Expansion with DSCR & Cross-Collate

[Connor Hubbard]

Hello fellow investors,

I'm looking for some guidance and recommendations concerning a part of my real estate portfolio in Mobile, Alabama. I have a number of properties, but I am specifically looking at leveraging equity from two of them:

1. A property valued at $232,000, with an outstanding mortgage of $139,546.
2. A second property valued at $165,000, with an outstanding mortgage of $93,000.

Both loans are conventional and held with the same lender.

I've built a substantial amount of equity in these particular properties and I'm considering using this to further expand my portfolio. My aim is to maintain about 20-25% equity in each of these two properties and use the remaining equity as a down payment for another purchase.

I'm particularly interested in obtaining a DSCR (Debt Service Coverage Ratio) loan for the acquisition, using a cross-collateralized loan or similar product to tap into my existing equity. The objective is to preserve a solid equity position in these properties while maximizing my borrowing capacity for the new purchase.

I'm reaching out to see if anyone has experience with this kind of strategy or can recommend lenders (either local or national) that offer such products. I've started discussions with my existing lender, but I'm keen to explore all available options and gather as much information as possible.

Additionally, if anyone has insights or advice on the potential risks and rewards of this strategy, I'd greatly appreciate your input. I understand this isn't a typical real estate transaction and I want to ensure I'm well-informed before proceeding.

Thanks in advance for your help!

Best,
Connor

[Doug Smith]

The key thing to look at is "workable equity". For a non-owner-occupied/investment property, the amount a lender will lend is less than what you'll get from your residence. Couple with that the fact that you're doing "cash-out" and you can decuct another 5%. You're probably going to be around 75% of the appraised value for a cash-out refi on an investment property with a very outside chance at 80%. I know the HELOC on investment property we do are at 70%. That being said, with the numbers you mention, the first property has about $34,454 of workable equity and the 2nd has about $30,750. You'll need to subtract closing costs out of there.

I do have experience with this type of transaction, but there would be a lot more that I would need to know. Thanks so much.