Refinancing two properties to get another one-bad idea?

[Robert Siverd]

I am looking for some input on whether or not a deal I am working on is a smart move long term.  My partner and I own 2 SFRs. Rent total for them is 2270 a month.  Purchase price was 100k plus 15k in repairs for one and 128k with 1k in repairs for the second.  They are worth ~270k now and we just bought them a year ago.  We are under contract for a third property at 110k which will require 3k in repairs for it to be rent ready and it will rent for $1100 a month.

The idea that we are throwing around to not come out of pocket for the third property is to take a commercial loan from a local bank with 80% financing at a rate of 4.9% 5 year term/25 year am.  The current financing on the first two is a typical 30 year traditional loan at 80% loan to purchase price and a rate of 4.99%.  The plan with the commercial loan is to finance 80% of the first two properties based on appraised value(270k with 80% being 214k) which would pay the note on their original loans(182k) and leave 32k to use.  We would use that to put down the 22k on the third property which leaves 10k to use on the 3k in repairs.  The extra 7k would either come back to us or immediately pay down the new note.  Some of that would also be used to pay the ~$1500 in closing costs on this new loan.

I understand that this increasing how much we are leveraged greatly(by 34k).  The question is whether or not the benefit of getting the third property without any additional cash out of pocket is worth increasing our debt.  I plan to get our accountant's opinion as well once we get a little further into the deal.

I would appreciate any and all input.  Let me know if I missed some data that would help to give an opinion as well.

Thanks in advance

[Bryan Devitt]

IMO as long as they still cash flow with the new numbers, I would leverage everything at 80% and keep the ball rolling until I had the amount of properties I want. You can always pay them off later with the cash flow if you want, but you need the cash flow to do that.