Cashing out to buy another property

[Ryan Mackfee]

Ok...so now I have three rentals and they cash flow pretty good but i am tapped out on credit and because I paid cash for the last property I dont have any more to buy another property. What Iwant to do is do a cash out refi but the lenders are telling me I have to wait a year because I paid cash for the property. Is there another way? Help

[Dawn Anastasi]

Conventional lenders will make you wait a year before doing a cash out refinance. I've seen 80% LTV. That's the after-repaired value. Hopefully you buy low and fix up so that it appraises really well.

I've done one of these where I purchased a property for $24,900 and put $12,000 into it, then got a cash-out refinance loan after a year for $49,900.

If you find a portfolio lender, you can sometimes get those who will do a cash-out refinance almost immediately, and others where you need at least 6 months. Sometimes those LTV are only 65-70% however.

[Pawan W.]

I believe there is a time period, like 6 months from purchase to get the property financed without it being treated cash-out. It is called delayed financing.

[Pawan W.]

@Ryan Mackfee call local banks in your area

[Shaun Weekes]

Hello Ryan,

If you bought this house under 6 months ago then you can qualify for delayed financing and get a C/O refinance for up to 70% LTV. This is based on fannie guidelines and they're are some other items that you would need to produce as well to qualify for delayed financing.

I hope that this helps you with what you're looking to do.

[Peter Grosso]

Ryan, I had the same problem.  So what I did was pulled out a equity loan right after I bought the house cash.   It is similar to a Equity line of credit but has fixed rates.   I could only do a 20 year loan, but after the house is "Seasoned" you can do a refi and get a 30 year loan.   

This could really help if you want to keep this pattern going,  You can pull out the equity, buy another one cash, then pull out equity from there. 

[Albert Bui]

Originally posted by @Ryan Mackfee:

Ok...so now I have three rentals and they cash flow pretty good but i am tapped out on credit and because I paid cash for the last property I dont have any more to buy another property. What Iwant to do is do a cash out refi but the lenders are telling me I have to wait a year because I paid cash for the property. Is there another way? Help

Problem with Delayed financing even if you intend to use it is that you will only be able to obtain the lower of 70% of market or your total acquisition cost on your final HUD at closing upon purchase. If you buy a good enough deal you'll be able to take your entire acquisition cost back and have a note on the property for this amount. This however does not factor in your funds you'll need to put into the property to rehab it so you're still in the deal with some of your own money.

The reason your lender probably said 12 months is because after 12 months you can cash out to 75% on SFR's and up to 70% on 2-4 unit non owner occupied properties if you have 1-4 financed properties like you mentioned. Once you hit 5-10 it will get hectic but with enough portfolio lenders you'll be stylin' again so I would prepare and go network with as many community, regional, and business banks as you can. I preferably like business banks because they offer cash flow focused loans based on debt coverage ratios which is easy to accomplish if you buy right.

[Nilesh Makhija]

I would contact the local community banks and I have seen that they are willing to work more with investors. Also finding portfolio lenders will help you get started.