Cashing out of a rehab that was purchased in cash

5 Replies

Hello, 

I was wondering what would be the best option for getting my money out of a cash purchase. The property in mind is $65,000 and needs $15,000 in work. Once rehabbed the property would appraise for $125,000 and rent for $1300 a month ($600 profit per month after all costs with a mortgage of 70% of $125,000)  If I paid for this property in cash what would be my best option for turning the property into a 30-year loan? I want to be able to get at minimum my $80,000 that has been invested out and would like to do so immediately after work is completed. Thanks. 

Originally posted by @Kevin O'Brien :

Hello, 

I was wondering what would be the best option for getting my money out of a cash purchase. The property in mind is $65,000 and needs $15,000 in work. Once rehabbed the property would appraise for $125,000 and rent for $1300 a month ($600 profit per month after all costs with a mortgage of 70% of $125,000)  If I paid for this property in cash what would be my best option for turning the property into a 30-year loan? I want to be able to get at minimum my $80,000 that has been invested out and would like to do so immediately after work is completed. Thanks. 

 If you bought it for 65K cash and you want 80K cash out, you'll have to wait at least 6 months for new appraised value. If you can do 65K cash out, then you can do it under the delayed financing rule immediately.

I hope this helps and have a good one.

Originally posted by @Shaun Weekes :
Originally posted by @Kevin O'Brien:

Hello, 

I was wondering what would be the best option for getting my money out of a cash purchase. The property in mind is $65,000 and needs $15,000 in work. Once rehabbed the property would appraise for $125,000 and rent for $1300 a month ($600 profit per month after all costs with a mortgage of 70% of $125,000)  If I paid for this property in cash what would be my best option for turning the property into a 30-year loan? I want to be able to get at minimum my $80,000 that has been invested out and would like to do so immediately after work is completed. Thanks. 

 If you bought it for 65K cash and you want 80K cash out, you'll have to wait at least 6 months for new appraised value. If you can do 65K cash out, then you can do it under the delayed financing rule immediately.

I hope this helps and have a good one.

 This is of course spot on, as is usual for Shaun.

Only way to get it closer to ARV without waiting six months is to make the rehab budget part of the purchase price in the contract and on the settlement statement. Typically this is only viable when it's an investor-to-investor transaction and both parties are actively doing at least a transaction every year or two, ideally with a trusted GC they always work with. If there are any old time investors who haven't purchased in 15 years, or first timers, or non-investor consumer sellers involved, not really viable. A "secret menu" option basically.

Originally posted by @Chris Mason :
Originally posted by @Shaun Weekes:
Originally posted by @Kevin O'Brien:

Hello, 

I was wondering what would be the best option for getting my money out of a cash purchase. The property in mind is $65,000 and needs $15,000 in work. Once rehabbed the property would appraise for $125,000 and rent for $1300 a month ($600 profit per month after all costs with a mortgage of 70% of $125,000)  If I paid for this property in cash what would be my best option for turning the property into a 30-year loan? I want to be able to get at minimum my $80,000 that has been invested out and would like to do so immediately after work is completed. Thanks. 

 If you bought it for 65K cash and you want 80K cash out, you'll have to wait at least 6 months for new appraised value. If you can do 65K cash out, then you can do it under the delayed financing rule immediately.

I hope this helps and have a good one.

 This is of course spot on, as is usual for Shaun.

Only way to get it closer to ARV without waiting six months is to make the rehab budget part of the purchase price in the contract and on the settlement statement. Typically this is only viable when it's an investor-to-investor transaction and both parties are actively doing at least a transaction every year or two, ideally with a trusted GC they always work with. If there are any old time investors who haven't purchased in 15 years, or first timers, or non-investor consumer sellers involved, not really viable. A "secret menu" option basically.

I have never thought of doing a deal this way but it makes sense. Similar to a buyer requesting credits for items found on a home inspection I would guess but on a much larger scale. Thanks.  

Originally posted by @Shaun Weekes :
Originally posted by @Kevin O'Brien:

Hello, 

I was wondering what would be the best option for getting my money out of a cash purchase. The property in mind is $65,000 and needs $15,000 in work. Once rehabbed the property would appraise for $125,000 and rent for $1300 a month ($600 profit per month after all costs with a mortgage of 70% of $125,000)  If I paid for this property in cash what would be my best option for turning the property into a 30-year loan? I want to be able to get at minimum my $80,000 that has been invested out and would like to do so immediately after work is completed. Thanks. 

 If you bought it for 65K cash and you want 80K cash out, you'll have to wait at least 6 months for new appraised value. If you can do 65K cash out, then you can do it under the delayed financing rule immediately.

I hope this helps and have a good one.

Thanks, this was the general consensus I was getting. I wish the gov didn't have to regulate everything. If only I was around from 2003 to 2007.