What condition does a property need to be on to pull cash out.

Question

Omari Morgan · Answer

Thanks for all of the input @Alex Bekeza, @Dave Skow, @William C., Account Closed

Dave, you guessed right.  6 homes total.  With a loan only on my home.

Mike and Alex - Good stuff.  So the I have owned the homes between for several years.  Oldest 5 years Newest 6 months.  All but the newest one I have 2 years of tax refunds showing positive cash flow.  The only issue is that one is not rented at the moment. (The tenant just moved out)  Should I wait for a new tenant?

William - Thanks that gives me a some piece of mind.  I think you are 100% right when you say I am "creating fear where there shouldnt be."  Your insight was very helpful.  I think Im just trying not to go to the bank and make a fool of myself.

If anyone else has anything to add.  Ill take it!

Account Closed · Answer

The area shouldn't have any impact on if they will do a loan. That may affect value, but it shouldn't affect the ability to borrow against them. Since they are "free & clear" the question to ask each lender that you talk to is "do you have any seasoning requirements" Find the ones who will lend today without making you wait 6 months or a year. They are around, you just have to keep calling until you find one. If your plan is to have renters, generally once they are in place and paying rent, 75% the rent they pay will goes towards debt repayment (which is a good thing and increases your likelihood of getting financing.) So, your decision then is "do you put renters in place first or do you have enough current income to meet the banks debt to income ratios" for the loans you plan on taking out.

Dave Skow · Answer

How many properties do you own now ( including your  home ?   how many of these have loans on them now ?

Assuming the only home you might have a loan on is your home ...you should be able to access  75% of your rental property(s)  value  .

All the best,

Alex Bekeza · Answer

With rental properties, lenders typically want to evaluate the worthiness of the property first, borrower second.  That being said, on a cash out refinance, you're going to get the lower of 70-80% of the purchase price or appraised value.  Of course if you bought these cash a bank would love to see that you've added some value.  You'd have to make your own calculations on what improvements will actually go towards getting a higher appraisal and which are wasteful.

Lenders are going to be less concerned with it being in a "C area" (if by that you mean the part of town with more crime and poverty) than they will be about whether or not its Cashflowing!

Do not expect an easy time or ideal terms on a cash out refinance if the property is not occupied and cashflowing.

There's a lot more that obviously goes into this but I hope this helps and feel free to reach out if you want me to take a closer look at your situation.

All the best,