@Risha Walden I think the desire not to have a mortgage is what's making your life harder than it needs to be here. A better approach, IMO, is to take the long term mortgage debt and invest the capital in another asset that you can borrow against as a line of credit. In my case, that other asset is municipal bonds from my state. Others do it with whole life insurance. Pretty much all the sophisticated investors I know are doing this in one form or another. End of the day, it means I'm earning ~3.75% on any extra cash I have lying around in the bank ... plus an arbitrage, depending on the current state of interest rates and the bond market.
In short, it looks like this:
1. Take out a 30y fixed mortgage on the free-and-clear property for, say, $200k. Assume this is at 5%.
2. Buy $200k of, say, NJ municipal bonds with an effective yield of, say, 4.8%.
3. Open an LOC against the bond portfolio. You should be able to borrow up to 80% of value, with a rate of, say, 4.5%.
4. When you need some capital, write a check from your LOC account.
Beyond the value of flexibility, you also get to write off the mortgage interest expense as a business expense, and the income from the bond portfolio is state and federal tax free. Lots of variations on the general strategy, including using T-bills, whole life insurance, and other assets, depending on variables in your life.
End of the day, it's essentially always a missed opportunity not to take a FNMA-backed fixed rate mortgage if you can get it.