Real Estate Investor · Reading, MA · Member since 2008 · 124 posts · 15 votes
here is my deal, the listing broker says cash only deals...its a 2 family...100K price, needs 10K in work...rents are 1200 and 1500
my ? is if i do a cash deal it will be all of my cash...i want this deal but want to make sure i can refi right after purchase...i have my calls out to the banks i have been working with
do you think i will be able to get a mortgage right away and get my cash out of building or will they require seasoning of 12 months or best case 6 months...?...thanks all
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
May be difficult to get all your cash back quickly. This would be a cash out refi. Value for the refi may be fixed to the purchase price and ltv limited to 70%. I'd be sure to speak with lenders before you start and be sure what they will do.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
My understanding, cash out refi's are requiring a minimum of 6 months and lots of 12 month seasoning requirements.
If you only need say 50% cash out, why not get loan approval on a 50% LTP (loan to purchase) and convince the seller that 50% cash down will get loan approval. You could also offer a large, non-refundable EMD to the seller to ease the mind. Make sure you "know" the loan will get done though, or all your cash will be stuck in the property until after the seasoning.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Maybe cash only really means "no conventional loans" in which case you might be able to do a card money loan. That would make the refi easier. The nasty cost of the hard money may not be worth it.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Because refi-ing out of a HML is a rate and term refi. That's going to be easier, less seasoning, and probably a higher LTV than a cash out. Lenders distinguish between a rate and term and a cash out. Even then, get approved for the refi before you buy. I am hearing 6 months seasoning even for a rate and term.
If you can get the HELOC, grab your cash as soon as you can, then lock in the interest rate. Often HELOCs have only a 10 year amortization schedule vs. 30 for a regular loan. So, your payment will be higher.
Wentzville/St. Louis, MO · Member since 2008 · 359 posts · 1 vote
17y
If you use a hml for the purchase then a rate/term refi based upon the true value of the property will not be an issue so long as you meet all qualifying criteria.
This is still possible with cash out but you'd need to use a local bank or portfolio lender. They would do a commercial loan that doesnt have any restrictions. You wont end up with a 30yr fixed rate though. More like a 20yr am with a 3-5yr balloon.
Murray Hill, NJ · Member since 2008 · 204 posts · 15 votes
17y
Originally posted by Jon Holdman:
Maybe cash only really means "no conventional loans" in which case you might be able to do a card money loan. That would make the refi easier. The nasty cost of the hard money may not be worth it.
Isn't the "no conventional loans" condition on a short or REO usually indicative of a property that will need a lot of rehab work? In my limited experience that tends to translate to a lot more than 10K worth of work. BG, I think you might want to investigate why they will only accept cash. They might know something you don't about this property. Just my $.02 ...
I'm taking HELOC money out to pay for a carport I built. The HELOC may be run over 10-15 years but the payment is high because they require a 1.5% monthly payment which is more than P&I. Still since they might close down my unused HELOC I'm going to use it a few months and throw money at it later in the in year.
Real Estate Investor · Colorado Springs, CO · Member since 2009 · 9 posts · 0 votes
17y
I was unaware of the seasoning requirements on a recent condo purchase. I paid cash using a primary home HELOC, fixed it up, and am now renting it out. I had hoped to refi, but I need to wait 6 months to refi at the original purchase price, 1 year if I want cash out up to 70% LTV (which is higher than purchase price).
I'm now looking for HELOC options on that investment property, so I can roll that equity into another purchase. My local credit union denied me because of risk in the property (purchase price way below tax value).
Anybody know where I can get a HELOC on investment property, with minimal seasoning requirements (purchase was 1/20/09)? The property is in Colorado.
Wentzville/St. Louis, MO · Member since 2008 · 359 posts · 1 vote
17y
Kirstan,
The guidelines you referenced are from Fannie Mae conforming lenders. I'm thinking Freddie Mac you can do cash out based upon the appraisal value after 6 months (not 12).
Is the condo fairly new. There are several restrictions for condos using conventional financing.
If you want to cash out sooner, you may want to explore using commercial/portfoliio/business. Most of these types of lenders do not have seasnong requirments.
Are both you and the properties located in CO Spring?
Real Estate Investor · Colorado Springs, CO · Member since 2009 · 9 posts · 0 votes
17y
Yes Ben, I and the property are in Colorado Springs. Where can I learn more about commercial/portfolio/business loans? I asked at my credit union (where I have a business account) if I could get a business LOC with the property as collateral, and they don't do that. I am 90% done with moving the property to an LLC (haven't recorded the quitclaim deed yet), not sure if that helps or hurts in terms of financing, I'm guessing it makes it harder.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
You'll just have to start calling around. You might try Bank of Choice. I spoke to them a while back and they were doing investor loans. They're only in the Denver/Greeley/Ft. Collins area, though, but perhaps they will do COS. Most banks aren't going to do these. But if you call ten, you might find one. Don't call the big names. Keep an eye out as you're driving around for banks you've not noticed before and give them a call.
Real Estate Investor · Colorado Springs, CO · Member since 2009 · 9 posts · 0 votes
17y
Jon, would it be any easier if I kept the property in my name? My credit union seemed very close on a HELOC, but said the risk was too high with the sales price so much lower than the tax value. I paid $68k at auction with a $105k tax value. Seems like skewed reasoning, as though they wouldn't mind financing me if I had simply paid $30k more for it!
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Yes, it will be much easier if you have it in your name. The CU's argument is that the value you paid, $68K, is the true value. I'm hearing 4-6 months to do a rate and term refi based on a new value. I'm sure, though, they will want to see substantiation of the new value. But, if you've done some fixup, you should be able to show that. Its the cash out that I think is a problem for you. Banks see cash out loans as riskier than just paying off someone else' loan.
Even if you did a 70% refi based on the purchase value, you would get some of your cash out.
Why not just leave it on the HELOC until you have enough seasoning to get back what you need.
Had you paid $30K more, you would have established a value of $98K rather than $68K. You could get a larger loan, but you'd still be dealing with the same "value" and seasoning issue.
Real Estate Investor · Colorado Springs, CO · Member since 2009 · 9 posts · 0 votes
17y
Thanks for the info, Jon. I'll have to think about whether to complete my transfer to the LLC, since that makes it harder to finance.
I was hoping to get cash out to purchase another property at auction... that REDC auction in Denver later this month. My strategy is to buy, fix up, and rent, and I'm looking for my 3rd property now. My hope is to purchase with cash, then refinance later after the fixup at the higher valuation.
The alternative is to get a mortgage for the purchase, but then after the fixup I'm going to be 50% LTV, and I'll want to refinance to get some of that cash back out. The fees on these smaller properties are steep (as percentage of investment), so having to do it twice is tough to swallow, but its looking like I need to plan that in. I haven't checked, but its probably still better than hard money on the front and a refinance later. I'd love to hear of other options if you know of any. Thanks!
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
You might want to look around for a investor-friendly mortgage broker down there. I'm kind of in the same pickle, and don't see much alternative to something painful. Either leaving cash in the property, or suffering through hard money and a refi.
Real Estate Investor · Colorado Springs, CO · Member since 2009 · 9 posts · 0 votes
17y
Thanks Jon, I guess its good to know I haven't missed something obvious. I'll see what I can find for a mortgage. My loan officer at InternetMortgage.com said he would help, but I haven't talked specifics yet for the auction. He knows he has at least one refi, maybe 2 or 3 in the queue for me, so he should be motivated.
Wentzville/St. Louis, MO · Member since 2008 · 359 posts · 1 vote
17y
I'm not sure that I completely agree that having the property in your personal name will make this easier. It really just depends on the circumstances.
For example, if you were looking to do cashout before owning 6 months it would be much harder to find financing in your personal name. That would be conventional loan and requires seasoning. Howerver, if the loan were done at a local bank/credit union they may portfolio as a business/commercial loan and wouldnt have seasoning. So it just depends.
Once you the relationship made with the right bank, then doing the rest under a business should be simple.