Cash out refi or loan against collateral

[Bryan Petrinec]

I'm sure this topic has been covered but the only posts I can find close to this topic are several years old and given the changes in lending over the years, I am asking again.  Please forgive the length of the post but trying to provide relevant background. 

We have a portfolio of investment properties in the N. Austin/Georgetown TX area - 11 buildings / 34 doors (a mix of 4-plexes and duplexes), 10 of which have conventional mortgages and 1 is paid off.  

The last group of buildings we purchased were six 4-plexes.  They were in rough shape when we bought them and knew that this was going to be an "investment" beyond the closing date.  The price was good, the rents at purchase were below market, and it was fully occupied.  We had a 5-7 year plan to get these building back up to a livable standard, get rents up, etc.  Unfortunately, the level of differed maintenance was more severe than anticipated and the 100% occupancy was propped up with people who hadn't paid rent. So long story short, in the past 1.5 years, we have renovated 9 of the 24 units, installed new roofs on 3 of the 6 buildings (this was known at purchase), and replaced 8 HVAC systems.  The initial plan was to renovate as vacancies became available.  However the previous landlord's criteria for tenants was breathing and could pay when they signed the lease- not after. I have gone through several more evictions and although 9 are renovated we still have 4 vacancies that are in the process of renovation.  On the renovated units I have been able to raise rents over 20%, have gone through proper tenant screening on tenants I have placed and have had no issues with the current tenants.  Although the timing was accelerated significantly, the overall investment was not a surprise.  

Then add in the perfect storm - longer times to get renovated units rented due to covid.  May of 2020, one of the duplexes was struck by lightning causing a rupture in the water heater gas line and had a significant fire.  Luckily no one was hurt, but we are just now finishing up on that project now.  About $180k in repairs (mostly covered by insurance, thankfully) but has had related expenses that were not expected in April of 2020.  Then add in the winter storm in Feb where there was record cold temps for a record setting duration and add in power outages.  8 units with frozen pipe related issues some with expensive emergency repairs.  

Got into real estate in late 2017 understanding the risks and thought we had a decent operating cushion for emergencies.  All of the units generate income, just not fast enough for the amount of issues we have had to manage.  

(So much for the short version)

I am looking at 2 options - 1 selling a building to generate cash OR get a loan against the paid off duplex. I would prefer to get the loan and maintain the current portfolio if possible. The one that is paid off is the one that had the fire so both sides, inside and out, are brand new. 1 side is leased and we just got the CO for the other side last week and getting it rent ready now. ARV is in the $450 - $485k range. I would like to get $175-200k out of this which will allow me to finish up the repairs at the 4-plexes and then just deal with general maintenance issues. My question is on the loan - what vehicles are available? Fanny/Freddy are out - already have 10 mortgages. 5 were just refinanced - not enough equity for cash out but lowered the monthly debt service by about $800/mo. From what I have seen, business loans can use collateral but are shorter term, so I am concerned about the monthly payment.

Is there anything out there that I can get a close-to-conventional mortgage on 50% ARV on an investment property??

If you made it this far, thanks for the interest.  Let's see what options I am missing.  We have great personal credit scores, but would prefer to keep the loan in the business if possible.