Investor · Modesto · Member since 2017 · 14 posts · 6 votes
Can i refinance immediately next day, after closing the purchase loan on investment property.
City: Jarrell, Texas - 76537
The local city lender which i picked has following :
Advantages:
1.)Can commit to close on time.
2.)Which means my earnest money of $10K is not at great risk.
3.)They have good network of appraisal folks, so they can get that in 1 week timeframe.
Disadvantages:
1.)Section A: origination fees, discount points and worst rate overall,
2.)No lender credit.
3.)Total $5K cost difference compared to online lender, along with 1% interest rate difference.
Online Lender: LoanDepot, Better.com, which provides competitive rates.
Local Lender: Keeping it anonymous in this forum.
Also, if it is allowed, can i bump up my interest rate way higher, so that my closing costs(A+B+C+E) are close to $0, so that immediate refinance will not cost be double closing costs?
Would you like me to lend you $100 to buy that broken ps5 so you can fix it and resell it on ebay? If so I want you pay me back the original $100 plus 8% due in 90 days. Instead of monthly payments I can roll the interest into the final payment and no payments are due for 90 days, that should give you enough time to fix it and sell it. Since I don’t know you that well I’m going to need $2 up front. Deal?
@Account Closed so yes, you COULD do that. The ONLY thing that would save you is lender costs. But you’d still have your $ wrapped up into the deal, which means if another deal popped up and didn’t have other money available, you’d lose that next deal.
if you aren’t buying a lot back to back then 100% acceptable option and can do the rate and term refi quicker vs waiting 6 months, you’d then get your money back quicker and can put that right back into another property faster.
lets say it took you 3 months to rehab, rent then refi, you could now buy 2 in the same amount of time as these other folks who don’t care to listen or understand because it’s “extreme”. They miss out, and you double your rentals.
@Tucker Cummings@Steve Vaughan you can refi into your personal name, and at closing Quit Claim it into your LLC with ZERO problems and NOT have any worse terms. My last refi was 3.25% so 🤷🏼♂️
I do see what Steve is saying, and I’m guessing has a lot of liquid assets, if someone has a lot of cash and depending on volume of adding new deals and what else someone has going on financially then it’s 100% a good idea too, I’m just offering different scenarios as I don’t know everyone financial situation or their goals and exit strategies.
@Tucker Cummings@Steve Vaughan you can refi into your personal name, and at closing Quit Claim it into your LLC with ZERO problems and NOT have any worse terms. My last refi was 3.25% so 🤷🏼♂️
Quitclaiming your interest into and out of your name to and from LLCs can have serious consequences to your title chain, title insurance, hazard insurance, DOS violations and other things. And states vary.
Unless you're offering legal advice with your 'mentorship'?
Llike I was saying. Messing with LLCs. I have many, but none for little houses. For a reason.
@Steve Vaughan I save that for the attorney and my Real Estate CPA who focus 100% of their time on these things. They’re structured correctly. So I’ll continue listening to the professionals. But thank you sir. 👍🏼
@Joe S.if you put your own cash in the deal, for example lender pays 100% of purchase but you put 20k of your own into the rehab, you WILL NOT get that back without a cash out refi. Why?? Because a Rate & Term Refi is only refinancing your current NOTE, which is the loan with whoever your lender is. The new mortgage company will request a payoff from the lender and that’s what they will go off of.
I wonder if one could loan their own rehab funds as a second lien note and have that discharged with the first lien.
@Christopher Freeman on a refi, it will cover both loans as they will HAVE to be paid off in order to close.
Usually something like this is done between 2 friends (who are both investors and buying rentals). They loan each other money to help each other out, don’t charge interest or fees.
@Steve Vaughan I save that for the attorney and my Real Estate CPA who focus 100% of their time on these things. They’re structured correctly. So I’ll continue listening to the professionals. But thank you sir. 👍🏼
Well say that next time before willy-nilly recommending people do it like it's a hall pass in middle school.
@Steve Vaughan It's never been "willy-nilly", simple questions can clarify assumptions. I'm not here to argue my man, just love helping out others and sharing opportunities. I respect you have your way of doing things and that's great, I 100% agree there is always mistakes that can be made in ANY process but generally (like the 4-8 PM's i've been answering off this thread) if anyone asks questions they can find out the answers then decide if that's a good path for them or not, and then seek legal council to make sure it's done right.
Thanks for the information everyone. @Jesse LeBlanc - I'm currently unemployed so don't have a W2 income but I'm securing a line of credit to allow me to be a cash buyer for investment properties for long term hold and cash flow. I'd like to do a BRRR but I'm worried about the Refinance part due to not having a W2 income at the moment. Curious if you have any advice to navigate this matter with the goal of leaving as little of my capital in the deal so that I can rinse / repeat.
@Daniel Petta you bring up a VERY valid point that I didn't address earlier, so thank you for bringing up the W2 situation. I know a lot of folks may not be bankable but that DOES NOT mean you can't make these things happens and get rentals! Sure, it might make it a tad tougher, and you generally will have to pay a slightly higher rate BUT you can work with a lender like Finance Of America for example or other more friendly investor lenders who MOSTLY focus on the asset itself vs your first born child, hair and blood samples etc just to get a loan. And yes, this method will still work with them as well on the Rate and Term Refi.
This is another PERFECT example of WHY this strategy is very useful. You just have to find a better deal with more equity and make sure your appraisal comes in where you need it to be after a forced appreciation from the rehab.
@Jim Kalish I work with a Mortgage Broker, who then has direct contact with United Wholesale Mortgage. You or I CANNOT go directly to UWM, they only work with brokers which is how they're setup.
Until you reach your max # of conventional loans, you HAVE to refi (if conventional) in your personal name, then you can Quit Claim Deed back into the LLC at the time of closing, but the loan is still in your name and you are on the hook for that. You can later move them all into a portfolio loan (most portfolio lenders min is 500k), then start over so that you're getting better rates BUT it all depends on how many rentals you plan on buying etc. There are variables only each person themselves know, like their liquid capital, how many rentals am I buying, how much cash flow do I need, what is the individuals goals that will all determine this. (i'm only adding that so the trolls can't step in and get all pissy)
@Daniel Petta you bring up a VERY valid point that I didn't address earlier, so thank you for bringing up the W2 situation. I know a lot of folks may not be bankable but that DOES NOT mean you can't make these things happens and get rentals! Sure, it might make it a tad tougher, and you generally will have to pay a slightly higher rate BUT you can work with a lender like Finance Of America for example or other more friendly investor lenders who MOSTLY focus on the asset itself vs your first born child, hair and blood samples etc just to get a loan. And yes, this method will still work with them as well on the Rate and Term Refi.
This is another PERFECT example of WHY this strategy is very useful. You just have to find a better deal with more equity and make sure your appraisal comes in where you need it to be after a forced appreciation from the rehab.
At the very minimum, it sounds like your loan officer with the local lender is going to get his compensation clawed back if you pay off the loan early. That may affect future relationship with that local bank.
Can i refinance immediately next day, after closing the purchase loan on investment property.
City: Jarrell, Texas - 76537
The local city lender which i picked has following :
Advantages:
1.)Can commit to close on time.
2.)Which means my earnest money of $10K is not at great risk.
3.)They have good network of appraisal folks, so they can get that in 1 week timeframe.
Disadvantages:
1.)Section A: origination fees, discount points and worst rate overall,
2.)No lender credit.
3.)Total $5K cost difference compared to online lender, along with 1% interest rate difference.
Online Lender: LoanDepot, Better.com, which provides competitive rates.
Local Lender: Keeping it anonymous in this forum.
Also, if it is allowed, can i bump up my interest rate way higher, so that my closing costs(A+B+C+E) are close to $0, so that immediate refinance will not cost be double closing costs?
Bought my first flip in March, tenant didn’t move out til April, began remodel and just finished. Home is ready to be sold. I kind of want to hold on to the property, but I need to pay back my investor, can’t cash out refi, credit isn’t there.. what can I do????
I posted this on a Facebook group before digging through forums here on BP and coming across your strategy..
So what you're saying is I can order an appraisal, and pull out a loan for 75% ARV, pay back my private lenders, and begin renting out the property?
@Jain P. Keep in mind closing costs may be high and make it not worth it to complete a cash out refinance after six months. I had a purchase for 145k, after nine months the appraisal came back at 181k instead of the expected 190k. Closing costs were around 8k. I determined it wasn’t worth it to walk away with only ~13k after closing costs. Four months later the value seems to be around 210k based on other comps. Thinking of retrying a cash out refi after I see one additional comp in the neighborhood.
@Rudy Munoz it's not as simple as "ordering an appraisal". You will have to go through a new lender, probably for a 30 year fixed, they will do the appraisal (which you can always challenge if it comes back too low). Then from there depending on who you're working with will give you Max of 80% LTV but pretty common to see 75% LTV.
Then ONLY assuming your 22k borrowed after the fact was in 2nd lien position then yes, at the refi everyone would have to be paid off. (If it wasn’t recorded, you can always create a note & record, although you might be able to create the note, not record bu share with closing attorney and lender MIGHT work as well. I’ve not tried that before) But even 80% of 171k is 136,800 and you wouldn’t be able to roll in closing cost because there isn’t enough equity in the deal.
so most likely in this scenario, you’d still have about $6000-8000 you’d have to bring to closing.
BUT, 6-8k is far better than some of these other folks who’d put down 20% of the 171k or 34k for the same property.