203k load and equity. Is my plan fool proof?

Question

Hello, bigger pockets community. I am starting out my real estate investing career, and I have a great plan.( or at least that's what I think). So the numbers below are raw, and they do not represent the exact values of the property, they are just to set an example.

So If I go and buy my multifamily unit for $50000, rehab it for $30000. Now the dwelling is possible worth $100000-120000.  Because I only borrowed 80000, my equity is now about 20000-30000. Of course minus interest and everything else that goes into a loan.

Now, is that equity mine, and would I be able to use it to get an equity line of credit ? I hope to make a deal like that, and use an equity line of credit, to get a second unit as soon as possible.

If somebody has experience with 203k loans, and has free minute, please respond, because I cannot find an answer on the web.

Thank you all so much, for all the inspirations and ideas. Love this forum

Wayne Brooks · Answer

@Ivan Dushchenko What you seem to be misunderstanding is:

You can get a heloc for up to 80-90% of The Value Of The Property, Less Your 1st Mtg.

You can Not borrow "80-90% of the equity itself".

Simple example:

$100k property

$70k first mtg

Equity = $30k

80% heloc= $80k (80% of value) less existing $70k mtg=$10k can be borrowed (not 80% of $30k)

Stephen Chaney · Answer

When you refinance a home you replace your old loan with a new loan. The bank will lend you (depending on the bank) 70-90% loan to value. If you borrowed 80k and the building is now worth 120k, and cash out refinance at 80% Loan to value your new loan amount would be 96,000. If they do 90% your new loan would be 102,000

90% LTV = 102,000 - 80,000 = 22,00080% LTV = 96,000 - 80,000 = 16,000 cash out.'

I hope this helps, I know this stuff can be confusing at first. You're thinking is on the right track though.

Ivan Dushchenko · Answer

@J Eric Lybarger If you can send that questionnaire it would be great.

Ivan Dushchenko · Answer

@Wayne Brooks Now it makes perfect sense. Thank you, so much for taking time to clarify this for me.  Now I have a better idea, on target price for the property and the area. My goal is to be able to take out, about 20-30K with a HELOC within a year after purchasing a property. I am not sure if it is achievable (It only my first buy), but that's the plan.

I am planning to get pre-approved on 203k within a month or so( I have a little tweaks I want to make to my credit ), while looking for a property.

Again, thanks a lot.

J Eric Lybarger · Answer

I can send you a questionnaire about the property/deal and get you an option of possible lending terms

11 Capital Finance is a nationwide commercial mortgage company that works with hundreds of lenders in the United States.

On the Permanent Side we do: 1. Bank Loans (conventional and SBA loans 1M+), 2. Bank Alternate Stated loans (these lenders are not banks and borrowers do not need to submit tax returns to qualify for these types of loans).  On the Temporary Side we do: 3. Renovation loans (for 1-4 unit investment properties and some standard commercial properties), 4. Bridge Loans (for 1-4 unit investment properties and commercial properties) and 5. Ground Up Construction loans (for 1-4 unit investment properties).

The principals of 11 Capital Finance have been in the commercial lending business for over 20 years and know how to properly advise a borrower on any type of commercial real estate transaction. We have worked with thousands of borrowers, and continue to, due to our superior customer service and knowledge of this business. We stay with our borrowers through out every step of the commercial lending process to ensure the loan closes properly and in a timely fashion. 11 Capital Finance personally handles all title insurance issues, property insurance issues and does all of the coordinating with every party involved in the transaction for our clients. I have attached our product sheet, which is a summary of the lending programs we offer. New lenders and programs are added weekly.

Ivan Dushchenko · Answer

I appreciate your help. But I am not talking about refinancing ( unless I don't understand something ). I am just talking about simply getting a heloc, Once my dwelling is worth more, than I have borrowed.

So will i be able to get a heloc, while having a 203K loan on it?

Down the road, I definitely want to refinance the house to a conventional loan. But in a shorter term I just want to get a heloc, to put down payments on other property.

Thanks

Ivan Dushchenko · Answer

I do understand that equity line credits are usually 80-90%. But why do you say ill be able to get 1/2 the equity ? Why not the 80% of the equity

203k load and equity. Is my plan fool proof?

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