HELOC Options for STR Purchase

[Paul Lovely]

Hey everybody! I'm debating between 2 HELOC options to use for my first STR purchase. For context I bought a duplex in 2019 that I'm house hacking for $229k and it just appraised for $375k. Citizens bank did the appraisal and offered me a $95k line at 5.5% variable (Prime + 2.25%). This is 85% LTV.

I also put in an application through a local credit union and they had conditionally approved me for the same line at 3% fixed for 3 years, then variable so much better terms. However, their AVM computer appraisal came back wildly low at $290k so they are requiring that I pay for an appraisal which would take another 8 weeks or so. 

I plan to use the money for my first STR as I previously mentioned, so the interest savings is well worth the cost of the appraisal. My main concern is having this appraisal come in artificially low (banks being conservative) and being out the cost of the appraisal and behind 8 weeks at which point my offer with Citizen's would have expired. One one hand, the more money I can access, the bigger and better STR I can get. On the other hand, a lower appraisal could protect me from becoming over-leveraged. I'm having a hard time balancing these two concepts.

I have a call with The Mortgage Shop next month and I'm very excited to get started. Thanks for reading!