Cash Out Refinance Reno Before 6 Months

[Paul D.]

Okay,

I got my first deal lined up. I am going to cash purchase a home for 40K and put 15K into it in renovations. Comps show it should on the low end appraise for 67K high end 73K. However, I want to cash out my investment within a couple of months. I know there is the delayed financing exception, however, you can only cash out the original purchase price of the property for 40K plus fees... how can I make this work and get only 55K out or at least 50K when I refinance within 1-6 months? I don't want to cash out more than I have into it, just want to cash out to do another investment property.

Any suggestions would be much appreciated!

Paul

[Albert Bui]

Originally posted by @Colby J.:

@Albert Bui 

Unfortunately for me, you have confirmed what the other banks have told me.  I was hoping there may be some other lenders out there that worked differently.  The acquisition costs for this property were only around 23k, but I have around 50k total in the deal after rehab.  It should appraise between 85-90k, so I was looking to get a cash-out refi on the appraisal value, but it seems I will have to wait it out after all.  Thanks for the help Albert.

Welcome, what I mentioned was the conventional lending route.

One way to solve your issue is to 

- get get a private/hard money lender to lend you the acquisition and rehab cost as "one," loan based on your ARV. So they will fund your loan at 80% of your 95k ARV and you'll record with a note of 76k. They probably won't do this for your first or even third deal and most likely only do this if you're proven as well (back to the dreaded relationships)

I strongly suggest you have solid comparable "sold," comps of this 95k value and ideally 2-3 to back up your value. The comps would need to have all similar characteristics - age/build/year/amentities/lot size/location/ownership/etc  to your property so that when you go to do your rate/term refinance (planned exit strategy) into conventional financing to payoff the current note you won't have issues with the appraisers because they tend to be very conservative on refinances shortly after buying a property at distressed prices. Appraisers are even more so conservative if you bought the home for 23k 1-2 months prior to the rate/term refi and now are trying to justify the 95k (4x increase!).

This is why it might be great to network with local appraisers who serve on the panels for local banks because they can give you insights and temperments of each local bank in the area. They will let you know how each bank wants their appraisals adjusted and comps picked which can give you a huge insight on how you will plan your exit strategy when it comes to accessing your capital again post rehab.