"Howdy" from Dallas! I tip my 🎩 to ya for HELOC advise

[Michael Bracken]

Greetings, I would like to raise some money for conventional financing of a duplex or 4 plex. I have a rental with 110k equity owe 39k 6.5% and a primary residence with 100k equity owe 98k 4.5% 15 year note. If I cash out refi the rental it won't cash flow. ($4500 yearly taxes) I was thinking about taking a Heloc fixed 6% (initial 40k draw) from my primary residence and paying off my remaining rental mortgage 40k in one payment. Paying off the simple interest Heloc afterward is much, much....much faster than the 2k I paid on the amortized mortgage principal all this year with $900 P&I payments. 4 years vs 20 years for the same $900 a month by my calculations. Lastly, I'd have a 60k 6% variable rate Heloc (that's the most I qualify for in Texas)with a $0.00 balance ready to use at anytime. 1k cash flow from the rent house, plus the cash flow from the acquisition to pay off the Heloc. Is this a good plan? How can I make it better? Where am I wrong?

[Tyler Hodgson]

@Michael Bracken why not do cash out refi on primary at 4.5% 30 year fixed rather than a 6% variable heloc. I would be locking in as much 4% 30 year money as you can right now. 

If the rental isn't cash flowing with 70-80% LTV you might be best selling that rental to get the equity out and finding a rental with lower taxes. Have you disputed the property's assessed value?

Even on the rental I think a cash-out refi at 5% for 30 year fixed would make sense. I'd rather have $50k in hand with only $100/month in cash flow than spend $40k out of pocket to get $1000/month in cash flow. That would take like 100 months to recapture the cash savings there. I don't know the exact numbers on your property so these are estimates, but I hope you understand what I'm trying to say. 

In summary, I'd lean towards cash-out refi on 30 year fixed loans to borrow some cheap money. Hope this helps!