cash out refi??...need some help

6 Replies

Hi everyone

I could some help...I am a little confused.

I am looking into a SFH that is in a great area but needs about $15K to $20K in work. I can get house at 12K cash. Once fixed up I should be able to get $650 to $700 a month in rent.

Ive done a little research on the cash out refinancing technique but it just isnt clicking for me...all my other homes have been bought with conventional mortgages and cash.

For this one I would use my HELOC for purchase and rehab....

How do I pull cash out once it is rehabbed....

Thanks so much

Craig

You'll simply take out a new mortgage (aka cash out refi) on the house after you own it. Most people are familiar with getting a mortgage before you own the house in order to purchase it, but you can do the same thing after you own it.

Some things you'll want to be aware of are: 1) most lenders are going to require a seasoning period where you have to own the house for 6-12 months before you can pull cash out of it; 2) most lenders will only let you pull an average of 70-75% LTV out of the house; and 3) you don't say what the ARV is going to be for this house but most lenders will not do really small loans and are going to have a minimum loan amount somewhere in the neighborhood of $50k to $75k.

That helps tremendously Kyle...

ARV should be aroung $50K to $55K

Will smaller banks do this type of thing? I brought it up to the local bank I use and they werent too fimiliar with it. Ill have to poke around and see what my options are locally first

Thanks again Kyle.

Honestly it's going to be hard to find a bank to do loans less than 50k, but they do exist. You just have to call around and ask. I've talked to quite a few lenders and only found one (Union Bank) in my area that will go under that amount.

Your best bet is with a portfolio lender who keeps their loans in-house. In case you're not familiar with portfolio lenders, here's some more info on them:

http://investfourmore.wordpress.com/2013/05/12/how-to-find-a-portfolio-lender/

And here's some more info right here on BP on small mortgages:

https://www.biggerpockets.com/forums/51/topics/75707-mortgages-under-50-000

https://www.biggerpockets.com/forums/12/topics/76293-small-mortgages

https://www.biggerpockets.com/forums/79/topics/78508-small-investment-mortgage-loans

Best of luck!

Everything that @Kyle J. said is right on.

As far as who will do a less than 50K I've found that most local banks will do it in areas that have lower home prices. In FL where I invest I called 3 or 4 local banks and asked and everyone of them had no problem with doing less than 50K because they're used to seeing those home prices, but every big bank/online lender has the 50-70K minimum because the costs for them are too high for anything less than that. It may be different in your area but I'll bet if homes sell for that price range there is someone willing to lend on it.

I'm doing a cash-out refi right now on a property and there is really no difference from a traditional purchase the process is essentially the same just instead of sending a check to the home seller they are sending it to you.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here