What is the best way to source cash from current properties to purchase/acquire further investment properties?

Question

What would be the best way to invest by sourcing cash to purchase additional condos/multi-family properties?  Here is my position.

Single Fam:  $315k (balance), $700k (value determined using recent sales comps and houses on market)

2-Fam:  $475k (balance), $800k (value determined using recent sales comps and cap rate of 7%, buyers in my city would trip over themselves to acquire a 7% cap rate property, so its a conservative value projection).

From talking to local banks, I have the current HELOC rates:

2.74% (only cost is $370 appraisal fee), amortized 30 yr. for the single fam.

4.5% ($1800 closing cost) for 2-fam.

Would it make sense to get HELOC from both above properties and buy in cash?  If I purchase a $300k condo, 2br, it would easily rent for $1800/month.  Or do I use the HELOC to make down payments on other properties and do investment mortgages?  Those are:

3.99% 5/1 ARM 80% financed 2%/6% (condo/single-fam)

3.99% 5/1 ARM 75% financed 2%/6% (2-4 fam)

Thanks in advance.

Chootar Laal · Answer

Well, that would mean I will always be stuck with that higher monthly payment on the property I cash-out with right?  I'd like to have the option of selling this investment condo in 2-5 yr time frame if I need to.

Also another thing, this is a non-warranted condo, 1/5 units is owner-occupied so it doesn't fall under Fannie Mae guidelines and will be held under a bank held portfolio loan, if I get a mortgage loan for purchase.

Gautam Venkatesan · Answer

@Chootar Laal have you considered doing a cash-out refinance on either property? You would get a long-term fixed rate mortgage as opposed to a variabe HELOC which is payable usually in 10-15 years. You could then use the cash from the refinance to use as downpayment with leverage on more properties.