New to REI - Question on financing

3 Replies


If I make a cash offer at a ~15%-20% of the asking price and buy the home. Can I then get a loan to get my investment out?

For example: A property on short sale for $100k (market value $135k) and I offer $$80k cash. Once I have the title, can I then get a loan based on the home appraised value (equity) for $100k?

Thank you for your help!

Lending is done on the appraised value of the property in its current condition. 

So, for example...

3/2/2 valued at $100,000 in it's current condition

I buy the property for $50,000

The lender will finance up to 75% of the current value (75% LTV)

So, I could actually finance the entire purchase price, with no down payment. I could then get a HELOC for $25k for rehab.

I do a total rehab of $50k and have the house reappraised. It now appraises for $175,000. I can refi the home, again at 75% LTV, payoff both the original mortgage and the HELOC, recoup the $25k out of pocket I put into the rehab and walk with a profit of $30k (it will be a little less, with the refi costs), plus I still own the property and can now rent it out as a quality $175k home!

That's forced appreciation and leverage. God, I love REI!!!

The short answer is: if the property is financable and you qualify for the amount of financing you want to get, yes you can do it like you mentioned. Without knowing the details about your situation, in general you can do a new purchase mortgage within six months of purchase at lower rates. You can also do a cash out refi which will give you 75-80% of the appraised value as long as the market supports it. Be sure you are really sure about the market value of the property, aka do NOT depend solely on zillow or trulia. Their estimates tend to be high. The amount you can finance is based on the bank appraisal's value, which is very conservative. In other words, make sure 135k is supported by recent market activity.
Also make sure you can get a loan. I would talk to a good Fannie/Freddie direct lender or two to make sure you qualify.

@Hattie Dizmond  and @Nazz Wang thank you so much for your comments! I am starting out and just starting to get creative on how to structure my deals. REI is great!

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