Cash out refi on new property?

Question

Hello everyone!  Happy to say I am on my second investment property in 2 years.  Bought this house in June and im 1/3 thru the renovation to get the house up to its full market value.  Im using a mixture of cash, and a heloc on another home I own.

Im hoping to get some advice on obtaining a cash out refi as this will be my first.  Questions about minimum time time frame, competitive lenders to look into, and anything else I might want to be aware of so I am prepared for the transition with grace will be very much appreciated.  Thanks BP community!

Robin Simon · Answer

Can't speak for other lenders but the DSCR loan product is likely what would work best for your situation

A lot of the more conservative shops will require you to use your basis (purchase price plus documented improvements) as the value and limit you to 70% or so of that.  However, some lenders will stretch a little more and use an appraised value (which takes into account the greater value increase than sum of parts) but make you wait 6 months typically and have other requirements such as a minimum FICO.  Lowest available time frame I generally see is being able to cash out in 3 months

Jason Deangelis · Answer

@Ryan Deasy wow, ill have to keep that in mind.  Some of the fine print sounds treacherous.  Thanks!

Ryan Deasy · Answer

@Jason Deangelis

good questions and great job on this second property. def want to ask about seasoning requirements and LTV. alot of lender might sounds great and then you find they will only do a cash out at 60 or 65% LTV. we even had one place restrictions on what we could do with the cash out proceeds! thats another good question to ask!

Jason Deangelis · Answer

@Matthew Morrow great advice.  I should have been more specific about my situation.  I used cash for dp, closing, and a portion of rehab.  I filled the gap (around 20k) from my personal home Heloc.  I have a conventional loan now and want to cash out refi on that to recoup all of borrowed and some of cash invested.  I just need the direction to go for a refi sooner than my existing mortgage company which is saying the seasoning for a cash out would be 12 months.  Also worth a mention, I wish I heard what you said about Heloc rates two months ago.  I went from 6-8 and as a new investor didn’t think to check in on how fast it increased.  Lesson learned the hard way but still a great deal!

Jason Deangelis · Answer

@Anastasia G.

Thank you!  Its exciting and less stressful this time around.  When you say own funds, do you mean that by me paying closing and DP out of personal accounts I may be eligible?  Or are there other numbers to factor into that like rehab, OE and short term finance holding costs?

Jason Deangelis · Answer

@David M.  Thanks for all the advice.  I like all of the options you suggested.  I feel very safe with this investment and did my due diligence ahead of time to make sure in worst case scenario I would come out safe.  The only factor is the market values and interest rate hikes that are anyones guess to what may happen.  As of now my borrowed money is only a $100 difference to that of a new loan at arv.  Im not sure if it plays out that way every time but I was surprised the numbers were so close.  Gives me confidence to the whole idea if paying similar OE on the arv loan while getting the money back to repay the short term money.

Jason Deangelis · Answer

@Erik Estrada got it.  Im using cash for down payment and short term money now for the other expenses.  Im looking to stabilize after renovation into a 20 or 30 year.

Jason Deangelis · Answer

@Erik Estrada repay as as much initial capital to recirculate funds into the next project when I find it.  Thanks.

Jason Deangelis · Answer

@Robin Simon. Thanks for the info!  It was helpful.

Cash out refi on new property?

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