Finance or buy cash?

2 Replies

I'm looking at my second property and am meeting with my realtor on Friday to write an offer.  It's a duplex and I'm going to offer $30k.  I walked through with my contractor and he foresees $25-30k capex to get the property to be a quality property.  

My question is should I finance the property and pay cash for the improvements and then try to refi again after its finished and rented? Or should I just skip the step, and buy it with cash and pay for the upgrades and then do a cash out refinance at the end to take out 80% of the ARV equity? I figured that I would save $ in bank fees doing it the second way.

If the bank does not finance it the way it is, than you have no choice but to pay for it  all cash. 

As to how much money to take out?  It depends how much can you rent it out for?

This is what I would do. If I can rent it out for $600 a month, I want my payment to be no more than $300. You will avoid much financial stress.

Finally, If you can pay for it and have paid off...that is even a better deal.

Best wishes to you.

I talked to a lender, and they will finance the purchase, but I would have to pay for the renovation out of pocket.  Then I would have refi to cash out afterwards.  My thought is that I could just skip that step and refi at the end when it is completed.  I'm trying to list pros/cons to capitalizing the project both ways.

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