One of my goals this year is find a Fourplex to house hack in..and do some sort of BRRRR strategy.
Sorta a dumb question.. - If I was to purchase a Fourplex off market (all-cash/hardmoney) get it rehabbed and rented for the next 4-6 months..
Do I get ALL units rented out and begin the cash out refinance process? Or its ok to live in one unit? Would it be more logical to get units rented out and once the refi process is done..I move in one of the units.
How should I go with this process?
Ps. I can't get a FHA loan, PP is in the 7 figure range. (Bay Area)
The real purpose of a 'house hack' is to purchase the property with a low down payment loan due to the fact that you are getting owner occupied financing by moving into one of the units.
In your situation, for a cash out, I don't think it matters whether you are occupying or not, unless you apply for a loan that requires you to owner occupy. Most conventional loans don't but there are some that are less than 20% that do. It really just depends on what product you apply for.
The banking relationship is probably the most important piece of this discussion.
Each bank has their own regulation pertaining to stabilization. Some banks can start the refinance process as soon as 1 month of full rent collected. Some banks require up to 6 months of stabilization.
This would be a good discussion to have with your local banks prior to getting into the deal.
@Sean C. I agree with both of the previous statements. All comes down to the lender and the loan officer. I know of a "SmartSeries" program for example that allows investors 90% LTV on purchases of 1-4 unit residential properties with a loan of up to $1.5 million if it's a PR. That same program also allows 85% Cash Out on PR 1-4 unit properties. I'm assuming your idea is that after doing the rehab, the property value will go up, thus allowing you to tap into the equity? My question to you is, what type of rehabbing are you considering? Are we talking major structural or cosmetic stuff? Or are we just talking updating things to make a place more modern? Also, there is no ownership seasoning for the cash out as long as the original borrower is the one pursuing the cash out transaction.
@Jeff Brower Thanks. I definitely need to look into it more as far as which program would be best.
@Matt Popilek looks like I found my homework for the month. I’ll get to that as soon as possible!
@Debra A. Denimarck where can I find this “smart series” program? It sounds good! How does the rate on that program look like?
And to answer your question, yes I’m going to rehab to tap into equity, and more than likely do cosmetic stuff + updates to get the rents to market value!
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