Homeowner · Grandview, WA · Member since 2010 · 155 posts · 21 votes
So, I don't know how I have never heard of this method or financing a property, or at least it never stuck. The general concept is getting a refi on a house that you own free and clear to pay for a new property. That way you can pay cash and don't need to obtain traditional financing for that house.
My question, is where are the catches or limitations? I've listen to numerous audiobooks and read a bunch and this is the first time I have really understood this approach. Jeff mentioned it in a reply to one of my posts the other day, but it didn't quite click until last night as I was listening to the Weekend Millionaire audiobook.
I am assuming there is a limit on how many times you can do this, since Jeff said he was capped out on residential loans.
If anyone could give me a bit of insight (or a link to a good article) it would help me come up with some more specific questions.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
This is nothing new. There are only two ways to get cash out of the walls of any property, borrow it or sell the rights to it. You can do cash out refinances at 75% of the value of your property and use the funds any way you like. On your principal residence. Getting into non-owner occupied gets sticky, the LTV could be lower and the rates can be higher and you may be limited to the number of properties as well.
Taking this to the commercial loan arena will be an option, and you may be required to provide both properties, the refi and the new one under a blanket mortgage. Other aspects of of your deal will also considered, so it's not a slam dunk option.
Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
15y
this is a great way to offer competitive, strong offers, while still using the power of leverage. i don't work with larger banks, but i would think they require the title to season either 6 or 12 months before they'll let you pull some of your cash out--not sure though, someone else will have to chime in on large banks. small banks, however, will sometimes let you pull anywhere from 65-75% (depending on the bank) of the cash you have into the deal, the day after you close--no seasoning! i've done this a few times, and yes, it's a great way to purchase properties quick, and then get the loan to go buy the next one. Also, if you use a portfolio lender, your interest rate may be a little higher, but there's no set limit (like Fannie) on how many loans you can have..at some point, the VP of the bank may say you're too exposed or something, but in general, their guidelines are more flexible for investors...i would definitely recommend chatting up a bunch of small banks with 3 branches or less to see who would be interested in this..as a bonus, i even put my extra cash (liquid reserves) in their bank to show loyalty was a 2 way street...hope that helps