Cash Purchases - Questions on refinancing (Pulling out Equity)
Hi, we are working on our "buy and hold" business plan and came up with a couple of questions related doing cash buys of residential properties followed by refinancing to pull equity out.
We are planning to build a portfolio of single family or small multi-family homes for rentals. We intend to make initial purchases with cash as we assume the deals will move faster and we can probably get a slightly bigger discount on asking price if we propose an all cash deal. However, this strategy cannot scale indefinitely! Our questions are:
- Are the total closing costs and lender fees significantly higher o effectively to this process in two steps? Step 1: Buy the house for cash. Closing costs don't include any lender related fees. Step 2: Refinance (70%-80% of the homes value) to get some of the cash out to purchase the next property.
- Is this refinance going to feel more like a typical residential loan closing or does it feel more like a home equity loan process? I know this is probably fairly rudimentary for a lot of you so hopefully this is an easy one to answer.
Thanks in advance!