Cash Out Refi for Killer Deal
The Short: Looking at a cash out refi on two single family rental properties to use as a down payment on a commercial property.
The Long: My father passed away two years ago leaving my 80 year old mother with about 112K in debt. He also left her with a commercial property worth around $1M that she has no interest in. Rent from this property brings in around 2K/month. The lease is up for this tenant. Mom is not in a position to have this property sit vacant waiting for a new tenant or buyer and not have the income. I have a brother who has no income and lives off my mother's social security (another tirade for another day). I have made a proposal to my mother to purchase her commercial property.
The Seller-Financed Deal:
Downpayment of $112K (this will pay off all her debts and give her a couple thousand to have in the bank)
Monthly payment of $1500 (this plus her Social Security income is enough to cover her monthly bills)
Purchase price of $500K (balance due when I sell, when 10 years is up, or when my Mom passes...whichever comes first)
My Question: I have been researching using my rental properties for a home equity loan or for a cash out refinance for the purpose of pulling together this down payment. I am finding all sorts of information online regarding these products. Not all of this information aligns. I have a great bank I have worked with in the past. Before I go to them, I want to have an idea of what my options are. My two rental properties are valued around $270K with outstanding balances of $130K. Am I able to tap into all $140K remaining or only a portion? Is a cash out refi the best option to come up with $112K for the down payment?
My plan is to either 1) sell the property as quickly as possible (probably 1-2 years), 2) get a tenant in (probably 3-6 months), 3) build on the property to maximize monthly income (currently used as a used car lot, perhaps build a strip mall in its place...amazing location).
I seek all advice on every aspect of this proposal. Thank you!