BiggerPockets

Bought 3 properties for cash and rehabbed for rental, all cash flow with a 100% debt payment figured. I can provide all the expense statements. I would like to place permanent financing to get some, most, or all of my capital back out to do a more. My amount invested is about 240k. All are occupied. One is a single family with 4 bedrooms renting for 1100. One is a two unit a two bed down and a 3 bed up renting for 600 and 500. The third is a two unit renting for 500 and 600.

My wife and I are self employed, so unsure if traditional financing is the best source. Thoughts?

These aren't going to have much cash flow if you refi. $3300 in gross rents, less 50% (see Rental Property forum) leaves $1650 in NOI. You're probably talking three separate loans, so maybe $3-4K in closing costs each. Payment on $250K, assuming you can get all your cash back, at 6% for 30 years would be right at $1500. That leaves you only $150 in cash flow for five units. $30/unit. Perhaps better if you're doing the management and maintenance yourself.

You're asking about doing a cash out refinance. That's tough to do these days. You're going to be limited to 75% LTV for a conventional loan, assuming your primary residence is the only other property with a mortgage. Some lenders will count the rent, some will require it appear on two tax statements before they will count it. If they do, they will take 75% of the rent, less the expected PITI payment and call what's left "net rental income".

You'll need to have enough income on your tax returns to support the mortgages. If you're self employed, and show little income, you're going to have a tough time. State loans are non-existent.

For each loan, you'll need to show reserves equal to two months PITIA (a = anything else, like a HOA), for each of the existing mortgages plus six months PITIA for the new one.

You may have better luck with a small bank in the area where you have the properties. Some banks will do commercial loans. The term is going to be shorter, typically 15 years max, and the rate will be higher.

You're likely to have to wait a year to refi, unless you're willing to use the price you paid plus rehab as the value. If you want to use a new appraisal, plan on a year.

Jim,
I've been in the same boat for quite sometime. Your main culprit is your DTI (Debt to income) ratio. Since you and your wife are self employed and I assume you have a good CPA who knows how to minimize your taxes, your "take home" may not qualify you. I just past one year with my first all-cash property and in a process to get a loan (Hopefully) with a credit union. This property cost me $24,000 including the rehab and there is no similar property in the immediate area that sells for less than $42,000. I'm only looking for less than 65% LTV and I'll be amazed if they approve it.

BTW Tom has a brilliant idea (and believe me, I don't often agree with Tom... :wink: ) Biggerpockets credit union!!! Are you listening Josh?

Good luck

Get the government out of the equation. Fannies, at the encouragement of Barney "The Banking Queen" Frank, ENABLE losers to get risky loans so they can buy at the TOP of the bubble, then RESTRICT winners (with a cold objective biz perspective) from buying up deals at or near the BOTTOM. And then the taxpayers pick up the pieces and the tab.

Then they blame capitalism, bail out the banks, and use it as an excuse for MORE GOVERNMENT!

Call up the lender holding your home mortgage. Tell them you want to cash out some money to buy an investment property. "OH NO! You say you want to buy a property at half price, and rent it out for a big positive CF? Sure you want to do that? Sounds risky. How about a fancy home renovation? You can even get a 10k jacuzzi that can shoot hot water up your ass! We are having a special on 1 year ARMs this week. Interested?"

Sheesh!

Here is an option but it'll take time.
Form an LLC or a corporation. Have that entity make a mortgage to you for the amount of the loan you are seeking now. Don't forget to record that mortgage and draft a note to the entity. In 12 month, you can refinance for better rate and terms. Banks and credit unions prefer to refinance rather than make a cash-out loan...

Congratulation Jim. That is wonderful new for you. It seems that you are on the right track.