that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

I would suggest you do both of what you suggest - meaning get either a new mortgage (more conservative route) or HELOC on the townhome and use those funds to buy your next investment property.

We’ve taken note of your comment about the couch and are already looking into options—whether upgrading the cushions or replacing the sofa-bed—to ensure a more comfortable experience for our guests in the future.”My Recommendation:If extra capacity isn’t a top requirement, I’d opt for replacing the sofa-bed with a proper sofa (or upgrading its inner cushions) and responding as above.

How many mortgage lenders have you spoken with to get qualified and discuss allowable down payment options?

Now solely as a lender, i actually reverted back to it in unison with our mortgage origination software. 

I renovated the home while 3 of my friends lived with me and paid my mortgage.

Quote from @Nicholas Dillon: I read somewhere that you can request to have your mortgage insurance dropped once your Loan to Value reaches 80%.

@Eric Yu, @Brad Jacobson, I bank at MACU, but I use a mortgage broker for most of my loans.

that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

Take ownership of your mistake and learn to do the proper due diligence recommended above😊 Wow!