In the world of real estate, it seems like theirs always something else for you to learn right? So I have a quick question for anyone who might have some expertise in this area. My business has its niche in tax liens and deeds. I have been building up capital to buy deed properties from the state auction. I now have the funds but I want to make sure my exit strategy is solid.
Here's my question. If I purchase a property for let's say $30,000 at the deed auction for a property that has an current market value "as-is" of around $60,000 and an ARV of $100,000, will I be able to refinance and take my $30k back out to use for future deals with no problem?
These numbers may seem like a stretch, but it actually pretty accurately reflects the types of deals I'm looking at on a normal basis.
My complete exit strategy is to refinance, then rent out and hold for long term.
I appreciate any input and guidance. Thanks!
It depends on what kind of lender you look to. The quick answer is yes, you will be able to pull out all your money. But you're likely going to have to go with a portfolio lender - i.e. a local bank and a commercial loan instead of conventional.
I'm doing rate/term refi's with the local banks today and they're requiring no seasoning. I just completed the refi on Monday that I closed the initial purchase on May 27.
I had told the banker it was coming and had all the paperwork stuff done well in advance. But they did a rate and term refi and actually let me pull out an additional 3k as well on this one.
The one thing I'd add is that they probably won't do it unless the house has been repaired and is rented/occupied. They don't want to be in the business of rehab lending nor in getting stuck with a house that is not salable.
Then what you can do is after you get the loan with them, refi it again in another year into a conventional mortgage as a rate/term refi and you can get it back in the 30 yr amort and lower rates.
The only problem you may risk with moving it over is that the local bank may not like you using them to churn the loans. They're doing a lot of work to only get one year of interest.
Maybe keep one with them and then refi one, then keep one and refi one. That way they can see their profit and you can keep them as a lender.
The elephant in the room is do you get clear absolute title, are there any redemptions, etc. This will be state specific. Local title co. can tell you if you can get title insurance...this will tell you if the property qualifies for financing.
Thanks. Great advice from both of you! I will take all of what you said into consideration. Very helpful. :)
Have been playing in the liens for a while and have made good money, now typically I just get back tax money and interest, however, looks like I have a few really good ones on the hook!!! Now as for the deed, usually tax deeds are fine until you want to sell, then you either need to clean title or sell to a cash investor at a bit of a discount. To have a title quieted can be a few grand, but it has the potential to open up the number of buyers and increase propfit is huge. With you strategy of renting for a while, that allows it to be seasoned, which will help with clearing the title. Press onward.
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