Cash-Out Refi or Conventional Loan

5 Replies

My fiancé and I are in the process of closing our first deal using private money. The property is a SFH and we are trying to decide whether to flip or use BRRRR Strategy...my question for BRRRR is if it would be best to put the property in our name and do a cash out refi post-rehab to pay our lender back (her father), or potentially keep the property in the lender's name and purchase the property from him using a conventional loan after the rehab. Any help would be greatly appreciated!

@Caleb Childs - First, make sure you qualify for the loan.  Lending guidelines are the same if you are buying or own it.  So if you would not get approved for the full value now, you will not get approved for the cash out later

I would buy it in your name now, and do the cash out refi.  1 closing and 1 financing charge.  If you had the Dad buy it and then buy it from him you would pay transfer taxes and title fees twice 

@Brie Schmidt thanks for the good advice. We should approve for the loan, it was just a cash only deal requiring us to bring in her dad. I know they say don't mix family and business, but this was the best opportunity for us to get in the game so we jumped on it!

@Caleb Childs there are a lot of rules when receiving cash out with a conventional loan in the first 6 months of ownership.  There are portfolio loans that won't have as many rules but the rates could be very different or the terms.  I wrote a pretty lengthy article on how to do exactly what you described HERE It's a little lengthy so feel free to ask more questions if you need.  Thanks!

@Andrew Postell great article and thanks for sharing, that answered multiple questions of mine! I would like to get your opinion on how to structure our specific scenario: we plan to purchase property with cash (using private $), my fiancé will live in it during the flip (~ 8 mos), then we would like to keep the property as a rental, but pull as much cash out as possible to pay her Dad back including his profit. We plan to put the property in her name (as @Brie Schmidt mentioned) then do a cash out refi after 8 months. Do you see any issue with this or have any recomendations?

@Caleb Childs as long as the person who will be receiving the cash out loan is on title there should be no issues with getting cash out after 8 months.  Meaning, no companies on title please.  Just use an individual name and you will be good.  Thanks!