sub to cash out refinance

5 Replies

I have been reading all that I can on subject-to deals and I still have yet to find an answer for this question.

Are you able to cash-out refinance a deal that you acquired subject-to?

This deal is a duplex where the rehab of 1 unit needs to be completed and the other unit just minor repairs. Let's say the you acquire the property subject-to, renovate, and cash-out refinance based on the added value of the renovations. Pay off the existing lender and the renovation costs, then proceed with a normal buy and hold strategy renting the units out.

Could this work in theory?

Thanks for the insight!

If you have been in title over 1 year (some 6 months for bank portfolio loans) the liens filed are irrelevant, you can refinance based on the appraised value at that time, that's the rule. Owner occupied, rentals need to go to portfolio. Some banks may do a loan based on the sale price or appraised value which ever is less and include hard costs of improvements. A duplex will be harder to finance than a SFD detached home as comps are usually harder to find.

You need to speak to lenders in your area as to what they might do for you, secondary guidelines I mentioned above as the rule, portfolio lenders have some leeway. :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

As @Bill Gulley wrote, lenders will have title seasoning that might require a time delay before you can do a cash out refi. You should be able to do rate and term refi if you choose, but then why wouldn't you have just bought it with financing instead of "sub to" (assuming it needed nothing major as far as repairs)?

As @Bill Gulley wrote, lenders will have title seasoning that might require a time delay before you can do a cash out refi. You should be able to do rate and term refi if you choose, but then why wouldn't you have just bought it with financing instead of "sub to" (assuming it needed nothing major as far as repairs)?

@Steve Babiak

Thanks for the comment, and to answer your question, yes, the one unit would need major repairs, so that is why I assumed the sub-to would be ideal.

I like Sub-2 for quick sales, hand over the equity and close as soon as title is done. Another reason is you may not have a tenant, some need a lease in place to count for qualifying income. Limited cash down deals, buyer has 20%, buy it, put the lipstick on, get higher rents in place, the LTV drops for the refi later on. May not cash out? Get a private second, add seasoning, then refi.

This was a buy and hold, but just to mention, doing a refi with the intent to sell on an option or sub-2 afterwards can get your head slapped pretty good. Just in case some get ideas, LOL. :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com