How long for a cash out refi - advice before heading to the bank.

8 Replies

I have a local property that I am thinking of buying all cash...My question is once I buy it, a week later can I do a refi cash out?  The property is worth much more than the current asking price as its a foreclosure but needs a good solid week's worth of work to get it rent ready. The week would be spent doing the rehab on the property....  I haven't used this strategy yet, but was thinking about giving it a shot but wanted to know what others have to say before I go talk to my loan officer about it.  I guess i'm just curious if a property can double its value in a weeks time.  I am doing value added rehab...HVAC, plumbing, etc...  I am planning to use the cash I pull out to purchase another property...Should I drop that to the loan officer also as incentive to make this work?

It's possible to do a cash out refi right after the purchase, but the bank is going to base the loan on the purchase price not the estimated "double in value" a week later.

@Kyle Penland  

It depends on the lender you work with.

Yes, you can get your money out immediately, but not at a new appraised value. The loan will be based on the purchase price.

If you work with a traditional big bank then they will often let you refinance at the appraised value after one year. This is a great strategy if you can do without the cash for a year as you can end up with no money in the deal after the refi.

Some commercial or portfolio lenders will allow you to take cash out based on appraised value after 6 months (sometimes less), but the loan terms are usually not as favorable as traditional bank loans on residential property (that is, you'll probably get higher interest, shorter loan term, and lower LTV).

Meet with lenders, that's the best way to figure out your options.

Its usally best to wait 6 months so they can appraise the house for what its worth and not your purchase price.

We work with a portfolio lender that wants us to have owned the property for at least 3 months & have the place fully rented and all repairs complete before doing a cash out. I think that is fair. Our loans are typically 70-75% LTV. That is on the appraised value after the property is renovated and fully tenanted.

By the time we close on the refi it is usually 4-6 months from the day we purchased it.

We tried with other bigger banks but they want 6-12 months of seasoning.  Doesn't work for our particular business model.

@Michael Noto  if you don't mind me asking, who are you using for your portfolio loans?  Do they only deal locally or do they lend in other states?

@Ryan Wattenschaidt  This particular bank I am talking about only does loans in CT and NY.  

There is another portfolio lender I am planning on using for the 1st time for the 4-family we are rehabbing right now.  Can't flat out recommend them because I do not like to give the green light to a fellow investor until I have gone through the whole process with a particular lender, but they seem legit.  They do loans in PA tooI am pretty sure.

PM me if you want details.

@Ryan Wattenschaidt  *too

Some private lenders will allow you to cash out immediately once the improvements are made.  Talk to everyone and find out what your options are.

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