I just bought my first property cash with hard money from a family member. I want to pay them back ASAP and would like to know the best way to go about it. Should I apply for term financing or cash out refinancing? Or is their a difference?
Is the property now worth considerably more than what you paid for it? If so, you may be able to cash out refi and pay back the entire purchase price amount.
@Yvette Tatem . I’m assuming you used hard money to close quickly? You’re options will depend on what you’re doing with the asset. Will you be improving it? If not, do you have a tenant who’s signed a lease?
If you have an executed lease, then a applying for a residential investment property mortgage will be a fairly simple process, because you already have income to support the proposed debt. You'll be eligible for a loan amount equal to: (i) the lesser of 75% of the purchase price (or appraised value whichever is less); or (ii) a loan amount for which NOI from rents supports a DSCR of no less than 1.25x.
However, if you do some improvements to the property before you seek financing and then get a tenant, you can get financing for the appraised ARV.
I hope that’s helpful.
@Eric James thanks for the feedback. I appreciate your help.
@Terri Wyzkoski . Thank you, this was very helpful.
Commercial lender. They don't report on credit, low doc loans and shorter seasoning periods than banks.
Also, as mentioned above, cash-out refinance would be ideal.