Should I refinance on a property before rehab is complete?

Question

So I have a duplex property where I have 100% equity and I'd like to cash-out refinance but I was hoping to rehab the units first before approaching a lender. The units aren't in bad shape at all (they look very ordinary), but as tenants move out, I've been ripping out the carpet, putting in some modest upgrades, and making them nicer and raising rents.

However, I inherited these tenants on the property who have no desire to leave even with rent increases. I also have no desire to kick them out, but in this instance would it be prudent to hold off on the refinancing? I don't like having 100% equity in the property because it prevents me from putting those funds to work, but I also don't want to get a lot less money than I can from the lender on the value of the home.

Any opinion welcome

Theresa Harris · Answer

Account Closed  If you could use the money now AND rehab has to wait til tenants leave and that isn't happening soon, refinance now.  On the other hand if you are not sure what you'd do with the equity, then wait.

Kase Knochenhauer · Answer

Account Closed - waiting to refinance the property will likely give you the most back when it refinances since appraisals are based on current condition (and can't typically project as-complete).If you aren't dying for cash and don't care about maxing your leverage, go ahead and start the refinance process. Your property will cash flow better, you'll be slightly less leveraged, and also get your cash sooner so recycle your assets.

Account Closed · Answer

Well I was going to invest the equity in other other rentals to scale my business. I don't have a new property to invest in yet, but having the money means I'd be able to look for one.

How much less % wise would I stand to lose by refinancing now vs later ? If I refinance now we're talking about an ordinary-looking unit making $950/month vs a brand-new looking unit making $1250/month