HELOC Against Rental Property

[Ben D.]

Hello,

This is my first post here and I would like to say thanks in advance for any insight and advice.

Here's my situation:

I have two rental properties that I own free and clear. I've been building up some cash to put down on a third property and my plan has always been to borrow against one of the other properties to get that next property. I only need to borrow $35K but I've shopped around and unfortunately the closing costs on a cash out refi are very high when taken as a percentage of that $35K. Even though interest rates are great, I'd be paying over 8% for financing when closing costs are factored in. That obviously makes this plan much less attractive. The ideal option would be a HELOC (no closing costs) but it seems like banks quit doing HELOCS against investment properties after the financial crisis of 2008. I do have equity in my primary residence but not enough to get $35K.

The way I see it I have four options:

1.) Suck it up and do the cash out refi, and be out the $3K+ in closing costs.
2.) Lie and claim that the rental property is my primary residence.
3.) Wait until I have enough cash to have to borrow for this next property. (That would take me about 9 more months.)
4.) Look harder for a bank or lender who will do a HELOC on an investment property. I haven't tried any small local banks or credit unions, or any large online lenders like Lending Tree, etc. I have great credit, cash in the bank, a healthy income, and two properties free and clear...surely some bank would see that this is a no-lose deal for them.

So what do you guys think? Has anyone had any luck doing a HELOC against a rental property? Any suggestions? Any worthwhile options I'm overlooking? I don't really want to wait the 9 months because I know I can get significant positive cash flow right now, and don't want to miss 9 months of that.

Thanks again for any input.