HELOC / Refinance Maneuvering

[Christina Zimmerman]

Hello!

I've got an investment property that I bought in '19 that has appreciated significantly- I have approx. $50k of equity just sitting there, and I've been trying to find a way to access it. Here is a run down of my current situation:

I bought my first property with a conventional, primary-residence loan. I fixed it up while renting out a room until I saved enough money to purchase the next property. I fully rented my first property and bought my second property, again, with a conventional, primary-residence loan. 

As time passed, my first property has appreciated significantly. I originally wanted to do a cash-out-refinance to pull out some of that equity to use as a down-payment on my third property, but my lender informed me that the cap on cash out refinances for investment properties is 70% of the home's value, and, after closing costs, it is not worth it for me to go this route: (Property Value $155k * 70%) - Loan Balance $105k = $3500 accessible (before considering closing costs). In addition, if I refinanced, property 1 would now be considered an investment property, and I'd have to pay a higher interest rate for an investment property.

Now, I'm exploring the HELOC option. My condo (property 1) is vacant for the next two months, as my current tenants have just moved out, and I have plans to move some friends in when their lease ends at the end of July (they are paying me a fee to hold it for them that long, no worries). My understanding is that I can't get a HELOC unless it is on my primary residence. Would it be legal/would the bank buy it if I moved back into the condo for the next two months, fully rented out property 2 which I've only owned/lived in for two months, went through with the HELOC process, and used it as a down payment for a third investment property (since I can't get another primary residence loan for at least 10 more months)? I was told you can get up to 85% of the equity  as a line of credit: $50k equity * 85% = $42,500 credit available towards a down payment on an investment property. I've already got tenants living w me in property 2 that have agreed to pay the full rate once I move out. Also, our dogs don't get along, so that could be a valid reason to give the bank to move out and back into my first property?

Here's my question boiled down- can I move back into my first property, get a HELOC on it, and use that line of credit as a down payment on another investment property? I would have to move back out of property 1 at the end of July, either to live w my parents, or into my new, hypothetical investment property. So it would be a 2 month stay, at the longest.

If there are any other creative ways to access this money, please let me know. I've moved a million times the last few months, but I'm just crazy enough to do it again for access to another $40k, if it makes sense, legally. 

Your time and thoughts are much appreciated. Just trying to get to the next one!

Thank you!