Rate & Terms Refi + HELOC or Cash Out Refi?

[Eric Yu]

Hi all!

I've got a property rehab where I'm trying to think through how I should proceed with the exit. I plan on holding the property. Here's the context:

PP: $650k

Rehab Cost: $175k

Loan Amount: $678,300

ARV: $969k

I am on hard money for the purchase + the rehab budget, but will likely have enough cash to cover the rehab so I don't actually need to use the rehab budget. The project will consist of a cosmetic flip on the upstairs & fully finishing out the basement. The cosmetic rehab is looking like it will finish first. I'm trying to think through 3 scenarios right now.

Scenarios:

1) When the upstairs cosmetic rehab finishes, do a rate & terms refinance & then finish the rest of the rehab with cash. The ARV of just the upstairs would be something like $800-$825k. After hitting the 6 month seasoning mark & finishing the basement, getting a HELOC at that point.

2) Finish upstairs & downstairs (around 4-5 month mark), rate & terms refinance & again waiting to get a HELOC until after hitting the 6-month seasoning period.

3) Finish upstairs & downstairs, pay an extra month or 2 of hard money, and then do a cash out refinance. 

How should I think this through? What do people usually do if the rehab is finished before they can cash out refi or HELOC?

[Robin Simon]

Really just going to come down to the numbers and your personal situation (what you qualify for, overall liquidity/financial situation and goals).  Key is to just map out each option robustly in a spreadsheet (i.e. run the numbers) and let that guide you

[Simmy Ahluwalia]

#3 is your only option if you plan on a fully property appraised value refinance into long term debt.  ANY lender will require that the property be in "tenant-ready" move-in condition prior to refinance.