Equity Strip SFH - Sale/1031 on Horizon

[TJ Walstead]

Hi All! I'm a newbie to BP; I'd love to connect with you!

Goal
Make the best use of the equity we've accumulated in one of our rentals (including considerations on capital gains tax)

The Dets:
We have a 3/1 SFH that we house-hacked into a LTR here in a Minneapolis burb that has appreciated nicely. Approximate market value is 340K (purchased at 280K) and have 97K in equity. The property sits on a little over an acre and is not a killer situation for a LTR (splitting/building is not in the cards). I have a bank willing to go 80% on a second lien HELOC but I don't want to cut the legs out from a high octane 1031 later this summer by bleeding too much equity out. We're wading towards the 8-24 unit style of multi-family this year. The cashflow is not strong and this feels like a time to harvest. We have plenty of deals in our pipeline and the capital has lots of uses right now! We'd like to wait on a sale until June when leases are up so we can stage well. We're leaning towards extracting some of that capital for immediate use in our deal flow. A HELOC would net ~30K with minimal closing costs; that's a down payment on one of our LTR deals under contract. 

What would you do?!

[Daniel Anshus]

@TJ Walstead if the cash flow is already tight and you can’t increase rents to increase that, then In my opinion a heloc isn’t a great option. You’re going to completely strangle the cash flow and it’s not enough money to buy a property outright and use that income to pay back the heloc. In my opinion it would be a perfect time to use all the capital you have, especially since interest rates are continuing to climb.