What kind of loan can you get on a cash buy?

3 Replies

I know there are tons of posts on this topic, however most I don't understand or deal with rentals, or numbers that don't come close to what I am doing. So here is was I am doing

Cash buy on a tax foreclosure through the county for 43K, the house has a tax assessment of 118K and a fair market value of 90K. The house needs about 15K in rehab. I am trying to figure out how the cash out process works and what I can do. What I have seen in other posts is that the banks wont refi you unless you have it for 6-12 months. If that is true then how can I pull my initial purchase money out to rehab and purchase the next property? Is there a way to use the house as collateral to get some kind of loan? I only want to get out 50-60K on the house to go after another property thats for sale at 35K and use whats left to rehab the first house. This way when the first one is done I can jump right into the second one. Once the first one sells I can pay back the first loan, walk out with some money in my pocket and put that into the second home for repair. Then the sale of the second home will be all mine to pocket. It doesn't sound as easy as people make it sound on TV that's for sure. Or am I on my own planet? I don't know what the hell I am doing so I am sure that I am going about this all wrong.

I want to avoid what I ran into on my last flip, buy with my cash, rehab with my cash and during this whole process just watch the world go by and miss out on other opportunities. There is still way more to learn doing this and I have had my fair share of bumps, bruises and headaches so far. I want to avoid that this next round.

Thanks

Originally posted by @Account Closed :It doesn't sound as easy as people make it sound on TV that's for sure. Or am I on my own planet?

TV is not reality. Even reality TV is not reality.  :)

Have you considered partnering up with someone more experienced?  They can provide some capital to help you achieve your goals and you would learn from them.  Most likely you will have to give up profit but it can make the next deal you do more profitable for yourself.

@Account Closed I am not an expert here, but my experience is that banks loan you 75% to 80% of the lower of your purchase price or appraised value.  When a property has been renovate a property you clearly do an action that adds value to the property that make it reasonable for them to redo a loan at a higher than purchase base value.  It is my understanding banks are not allowed to loan you more than the 80% unless it is pursuant to a specific program, usually involving a home owner occupier.

@Dawn Anastasi offered one method of doing this differently to generate cash now. Here are some other ideas. First wholesale it for $52.5K. That is $90K FMV less the $15K repairs multiplied times 70%. Money back now and go after another one. Second, hard money loan. Interest rates and points will be pretty high so you will need a pretty good deal waiting to still profit after paying those high rates. Third, only borrow 80% of purchase price from the bank or $34K, which gives you your $15K to rehab, and $19K to use as down payment on your next purchase. If the bank will fund 80% you could buy a $95K property and pay $19K down using a regular loan. You wouldn't be able to pay cash, but if you have good credit, can show income from rentals or rehabs, and have a decent income you should be able to do this. Good luck.

How many flips have you done recently?

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