I'm close to completing my second flip, I just listed the property on my local MLS when I had an idea:
Why not cash out refi for more than I have in the property.
I bought the house for $40k in cash, I have less than $70k in it and it is worth about $95k.
At 75% LTV, I can cash out $71,250.
So, If I buy the houses right (cheap enough) and can fix them up for less than 75% of the appraised ARV value, why not cash out refi until I have the max number of mortgages and maybe even get paid to purchase homes.
Most cash out refi's require that you've owned the property 6 months, will loan at a max LTV of 75% and my lender will even include 75% of the rents in your DTI calculation if you can simply show a lease. With rates so low, PITI is rarely more than 75% of monthly lease, so DTI is never a restriction.
You can only have 4 mortgages traditionally, but new rules allow you to have up to 12 if you can hold sufficient reserves (6 months PITI for each).
I know it takes a bit of cash/capital up front to get started as I have been buying and renovating with cash. But has anyone pursued this strategy?
Anything I might be missing? Seems like I could potentially get paid to amass a portfolio of 1-4's.