Cash-out refinance after rehab on first of two houses on property?

6 Replies

I'm thinking ahead a bit, and I had a question about doing a cash-out refinance.

For some background, I bought a buy-and-hold rental for cash; it included two houses: a 3/2 in the front, and a separate studio cottage in the back. I plan to rehab both and initially planned to do a cash-out refinance when complete.

There were some difficulties with financing this deal, mainly because I already have five loans for other houses, so I raised funds with essentially a HELOC and a crowdfunded personal loan to purchase the house for cash and cover the rehab. Because of the change in plans along with some unplanned rehab costs, I likely won't have the funds to rehab both houses up front (although I can find additional funds if needed).

I read about Fannie Mae's "Delayed Financing Exception" which looks like it may be an option for this property. That said, I'm not sure that I can secure additional funds and finish the rehab on both houses within the 6-month window. I know that the rehab will be completed on the main house in time. 

Would it be possible to do a cash-out refinance with the rehab complete on only one of the two houses? Since some demo has begun on the cottage, would I need to get it back into a liveable condition first, or could it be included in the valuation in an as-is condition? Based on recent sales in the area, the ARV of the main house alone would be more than ample to allow a a full cash-out refinance, less rehab costs, under delayed financing, but I'm not sure how the cottage would play into the refinance valuation.

I know I should have figured out the exit plan earlier, but the last minute change in financing of the purchase threw in a monkey wrench.

Thanks in advance.

@Kent Verge - The problem you will run into is once you have 5 loans, cash outs are not allowed on NOO properties. You might want to try commercial loans since you have a track record, but I know most banks will only do 80% of all in costs or 70% of ARV

Kent,

You can do this under delayed financing but one of the guidelines they require is finding out if any of the money used to buy the home was borrowed. If you received a personal loan that might derail the delayed financing. You can always get cash out through private or hard money and then refinance rate and term with conventional financing.

You would need to really let the loan officer know all the details as this loan has a lot of moving parts. But it is possible from what you're telling me.

If you need additional help pm me or keep posting on the thread.

I hope this helps Sir.

Thanks @Shaun Weekes  but after reading the guidelines again this morning, I don't this it qualifies for delayed financing. I got a small amount of owner financing to help with some of the rehab costs, and it's essentially a mortgage with 90% down payment. :| 

At least I have time to talk to some bankers if we end up waiting a year. It may be that I need to spend some energy looking for a portfolio loan for the remaining four properties (or all five).

Originally posted by @Kent Verge :

Thanks @Shaun Weeks but after reading the guidelines again this morning, I don't this it qualifies for delayed financing. I got a small amount of owner financing to help with some of the rehab costs, and it's essentially a mortgage with 90% down payment. :| 

At least I have time to talk to some bankers if we end up waiting a year. It may be that I need to spend some energy looking for a portfolio loan for the remaining four properties (or all five).

Kent,

Yes this is what I mentioned earlier in the post. You can wait or just get cash from hard money or private money. Moving forward try to find one Loan Officer that knows your situation inside and out so that you can qualify for all 10 mortgages. Having a loan officer that is well versed in this area of Fannie Mae financing is crucial to your success.

I work with a local bank here in Arkansas, and they haven't been as restrictive. The couldn't, however, make a loan on the house in Florida.

Kent,

Since you have a good relationship that's probably the best route to go in your scenario.  Good luck and keep us all posted sir. 

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