Multi-Family refinance options

[Daniel Gibbs]

I have a two flat on the west side of Chicago that has seen a jump in value since I purchased the property 2 years ago.  Both units are rented, and I have spoken to banks regarding a line of credit to use towards the purchase of another property.

Community banks so far are not interested in giving a line of credit, but have offered refinancing options instead.

My current rate on the property is 3.75%, so I'm not eager to move to a significantly higher rate (5.25%).  Does anyone have ideas of how best to tap into the equity of a non-owner occupied building so that I can fund another deal?

Thank you.

[Mark Ainley]

@Daniel Gibbs  It is tough to get lenders to do credit lines on south and west side.  When I see it the amount is 12-15% but I see people in your position utilize that huge equity as an easy way to get private short term money from friends and family and then clean it up on your cash out refinance on the new property.

At the same time look at your cost you pay for the existing loan vs a refinance.  The only portion you should figure the additional cost at 3.75% vs 5.25% is the principle loan amount you have now.  That may be cheap vs a second loan or private loan you get at 8-15%.  If you have a $100,000 loan at 3.75% and that goes up to 5.25% but your able to get another 50-100k out the additional cost on your current loan is only $1500 per year which is a small price to pay to go create some other opportunity that over the life of that second investment can yield you $50,000-$150,000.

My biz partner told me years back, "Don't step over quarters to pick up pennies", which to me most of the time translates to calculate the money you are not making by taking that next step vs the money you are trying to save.

@Theo Hicks