Cash out refi strategies

Buying & Selling Real Estate
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Cash out refi strategies

Sol Naim
Member since 2023 · 20 posts · 6 votes

Hey BP team! I have a rental house I purchased all cash, half from a cash out refi on a previous rental and half savings. The rehab is almost done and I’ll be getting it appraised where I’ll be able to pull out around 500K for under 3K a month. I have a couple questions for my BP community. 
I'm torn between getting one property for around the same value or two properties for about half each. I'm in this to BRRRR, long term hold and try to make some cash flow. The credit union bank that did my first refi is saying they can only do up to 5 loans meaning only 4 more cash out refis. So thats swaying me to just get one property but if i find a deal for 200K and other for 300K and it can bring me more rent, shouldn't i do that?
The other issue is don’t i have one shot to cash out refi on that 500K rental? I cant cash out 200 and then later cash out 300 without paying a lot more money right? Meaning once i pull that 500K im going to need to spend it asap to get renters to pay off the loan so I don't want to buy one property thats just covering half the loan while feeling pressured to buy another fast. 
What are your thoughts?

Thank you! 

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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    2y

    Sol,

    If your credit union is capping you on your loans which is very typical, you need to check out another bank. Credit Unions have overlays and very strict guidelines and that is bad news for a real estate investor. When you refinance and take cash out you want to typically do a Max LTV cash out so long as you cash flow.

    In order to grow efficiently you need to make sure you are using a Bank/Lender that is investor friendly. Your future in real estate should be mapped out with you banker who can help create the best path. Conversations a head of time can help save time, money and avoid limited options.

    If you can maximize your cash out funds to buy more doors I would encourage that to build a bigger REI portfolio. As far as other banks you will also find out bigger banks offer better options like less down, Higher DTI options and more programs.

    [email protected]727-637-4289
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  • Sol Naim
    OP
    Member since 2023 · 20 posts · 6 votes
    2y

    I believe my lender told me it was a Fanny and Freddie Mac limit of 5 loans not just them but all banks, this is a recent rule passed. Any validity to that? If you know of a more investor friendly lender I’m all ears. Thanks 

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    2y

    Hi Sol,

    Congratulations for almost completing your rehab! Have you looked into the difference in cash flows between buying 1 property or 2 in your market? Depending on the market, 2 properties may bring in more cash flow than 1, as more units generally mean more potential rental income. However, this does mean more management so it would also depend on your management capacity.

    In terms of your loan limits, you can certainly overcome this by using a different lender or using a different program. Especially with lenders that focus on business-purpose loans, there is usually no limit as long as your credit and liquidity is qualified. And yes, typically it's most cost-effective to pull all the equity at once rather than multiple refinances. An alternative to this solution would be for you to purchase a multi-family rather than 2 separate properties.

      310-848-9776
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    1. Sol Naim
      OP
      Member since 2023 · 20 posts · 6 votes
      2y

      Thank you Ko. My refi was done in LA where both my rentals are but I am in Houston for some time now and looking to put my money here so I can get way more for 500K which is why I’m thinking two properties instead of one but yes, multi family is an option as well. 

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