Cash out refinance?

Question

Hi,

I paid cash for a rental property at a sheriff's sale back in May for $8500.

I would like to do some type of refinance in order to fund another project.

Do you have to wait at least 6 months to do a cash out refi on a rental property?

Is there anything else other than selling it that I can do with this property to get cash out?

Thanks

Robert Farris · Answer

@Michele Fischer, Thanks! I always forget how to do that...lol

I think my situation may be different in that I already had tenants the day I bought it, so I haven't had to do any rehab so to speak. So I guess I'm a BRR on this one....lol

Thanks for the help!

Michele Fischer · Answer

Robert,

Welcome to BiggerPockets!  And to low income investor/landlording, it is quite an adventure!

ARV is after repair value, what the house is worth now that it is more fixed up.  With smaller properties, it can be a struggle to get the refi to work out; the fixed costs of appraisal and such are the same for a large or small property.  But you are following the BRRR strategy that is popular right now - buy, rehab, rent, refi.  Make sure what you are getting is worth the cost.

To tag people so that they see that you responded, type @ and the start of their name.  When the full name pops up, click it.  Be sure to set up key word alerts and listen to the podcasts too.

Robert Farris · Answer

Thanks Stuart and Byron, I'll call around some smaller banks and see what I can make happen.

Dana, tenants are in place, and I do not have an appraisal yet on the property. It's a very small SFH in a low income area. It was one of 3 properties that the bank foreclosed on against my Dad.

Percy, I'm new to real estate and just learning all the terminology. I'm not sure what the ARV is at this point. I'm trying to learn as fast as I can....lol

I'm going to call around and see what I can come up with.

Dana Whicker · Answer

Do you have a tenant in place with a lease?  What's the house worth?

Byron Bohlsen · Answer

The delayed financing program would allow you to pull out your initial purchase price plus closing costs if that value is equal or lesser then 75 - 80% of a fresh appraisal - But I hear not many banks know about or use this program. Also most big banks dont want to lend at such low values.

You are probably better off going small local bank that doesn't use fannie/freddie. This will require calling around.

Stuart Birdsong · Answer

Robert,

Most banks have a 1 year seasoning period before you can refinance for 80% of appraised value. That said if you are just trying to take out 80% of your invested cash there most likely are some local banks who would allow for a cash out refi. The other idea is a HELOC, although banks have varying valuations for investment properties. Start by talking to some banks and see what you can make happen.

Cheers!

Stuart