1st Cash out Refi = Success!!

2 Replies

Hi Bigger Pockets! First post on the forums here!

I just completed my first cash-out refi of a SFH I bought June 2016 in the suburbs of MA, cashing out $61,000.  

Financials 

Purchased foreclosed: $220,000 - PITI $1385/month

Applied for and received a FHLB (Federal Home Loan Bank) grant of $15,000 that I used towards down-payment/closing costs. I definitely recommend 1st time home-buyers look into this program! This is a program where 1st time home-buyers who make at or under a certain % of the area median income (say 80% or less for example) qualify to apply for the grant, certain banks receive grant funds so you would need to ask your bank if they participate in this program

Rehab costs: $40,000 (lot of sweat-equity)

Appraised: $385,000

NEW PITI $1785/month: Refinanced into a loan of $260,000 ($325,000 with 20% down, 30 year fixed rate portfolio loan @ 4.375%) and pulled out $61,000 ($260,000 minus $191,00 owed on old loan minus $8000 closing costs) 

I could have taken out a higher loan (due to the appraised value) and received more cash-out $, but I wanted to be conscious of what my new PITI would be and make sure I could cash-flow going down the road.

Details

Before Renovation

864 sq ft 

- 3 bed 1 bath ranch style home, , attached 2 car garage, 1/3 acre yard
- Purchased foreclosed for $220,000 with a 30 year fixed rate loan @ 3.875% 
- PITI $1385/month

I worked with my local bank to build in renovation funds into the actual loan, where I would pay to have work done to improve the property (new roof, heating system, flooring, etc) and the bank would inspect the work then release funds to me to reimburse for the cost of each repair as they were made


After Renovation

- 1278 sq ft (finished basement added 415 sq ft)

- 3 bed 2 full baths

- Appraised Value $385,000

The first 6 months in the property was spent doing new roof, heating system, refinishing existing hardwoods (hidden under grey shag rug), new SS appliances, new paint inside and out, finished basement (added another living room, office/bedroom, and full bathroom)


For the refinance

I was quoted by my local bank for a 30 year loan a 4.875% interest rate. 

I asked the bank if they could do in-house financing and they said YES, and could do a portfolio loan. The PORTFOLIO Loan at my local bank was a 30 year fixed rate loan @ 4.375%. 

1/2% less interest with the in-house financing! (thanks BP for teaching me about different financing options!)

New monthly PITI is $1785 a month.

Going forward plans

I plan to rent the house out next year (after the 1 year required time period to live in the property after the closing, as specified by the refi contract) at a market rent of $1800-$2000/month. Rentometer average rent price is currently $1900 a month. 

I am actively looking to use the cash-out funds for an investment property (SFH or multi family) and am excited to build my portfolio.

Hoping this story helps anyone out there looking for their 1st deal! Please leave comments & questions, suggestions, etc!!!

Congrats @Account Closed ! Sounds like you are ready to kick start your portfolio to the next level!  Always jealous of the East Coast basements as they don't really exist out here...we have to built up or out to add SF.  

Do you have any advice on how you were able to pull off that local bank portfolio loan?  Perhaps it's more common back East but getting a local bank portfolio loan where I'm at seems like a unicorn at this point.  To be honest I have only tried local credit unions so far so maybe I need to go one level down from even that.   

Thanks and congrats again! 

@Jon Crosby thank you!

I think for the portfolio loan in my situation it came down to having a relationship with the local bank. I had my initial loan through them for 2 years and then refinanced with them into the portfolio loan. I feel like they were willing to do a portfolio loan based on my prior account history with them (timely mortgage payments each month). 

I would definitely recommend asking around to whatever banks you can, and maybe even offer to open a checking account and put some $ in it which might make them more likely to consider in-house financing for you. Hope this helps & good luck!

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