As you alluded to, sometimes a passive note investment purchased for monthly payments “goes south”, and becomes an active participation investment, with plenty of additional capital required for legal fees, forced place insurance, and property taxes.  

There are cheaper one’s in D/F areas but I would be careful as those can create a laundry list of additional issues.

Sounds like you put in a ton of work to maximize the value, and that basement addition was a smart move.I noticed you mentioned the NYC luxury tax and some of the rental pricing challenges—have you considered expanding your portfolio in markets where you don’t have to deal with those kinds of headaches?

There is no additional "risk" on the note like a demand clause etc, but you have  extra expense in upfront one time costs and the pre-payment penalty that most programs are sold with if rates do drop as expected in the future.  

Not a big fan of LTR furnished units, the additional wear and tear isnt worth it in my market and of course smoke smell can be hard to get out. 

We have no debt and good credit scores, do we have any options for making this work?

THere is a loan I have seen folks using in the past... not sure if it is still available but it is the MACU90 loan with mountain american credit union and it is a 10% down investment loan.

But they were selling an expensive house in California and had horrible credit.

@Kevin Connauton most PMCs won't touch this type of renting due to all the additional headaches and liability.We second contacting PadSplit.

Both properties have a substantial amount of equity that’s essentially sitting idle.Would it be a good idea to tap into this equity (through a HELOC, cash-out refinance, etc.) to fund future fix-and-flip projects or purchase additional rental properties?