I have an investment property worth 400k, the seller is asking 200k cash. I don't have the cash but I would like to buy and hold the property. With the new Fannie Mae rules allowing cash out refinancing for investment property would it be wise to get a hard money loan to acquire the property and then pay it back with the cash from the refi? I would meet the refi requirements since this would be my first investment property and I wouldn't be purchasing the home with another mortgage. The seller owns the home almost free and clear (small 15k) loan which could be paid at closing as well..... does this sound like a good strategy? I'm a newbie btw...please help :-)
I failed to mention the home was built within the last 10 years so it should be in great condition.....
I am a newbie as well so what I know is from reading here on the forums. From what I've read and studied is that Hard Money is a very expensive loan strategy. High interest rates, short terms, points to be paid on the front end and the back end of these types of loans. These Hard Money loans are usually funded at 70% of purchase price, so you'll have to have "skin in the game". You'll have to interview Hard Money lenders for their rates and guidelines. One option in this situation I would think of is asking the owner to seller finance the property to you for let's say 12 - 36 months, then you could refinance it to pay him off after the end of this term. Seller financed terms, price, interest rates are all negotiable so think outside the box.
Keep us posted on how you move forward with this property.
On a side note, why is a seller asking 50% of the value of a home that they own nearly free and clear AND needs no work. Certainly deals are around to be had, but giving up 200k for free......
Be thorough about your numbers, especially if buying with hard money first.
@Lora Bostic I think if you try to refinance it using a conventional lender, they're going to use the $200k value you paid, and probably only loan 75% of that if it's an investment property. So it's possible you could have to bring money to the table in order to refinance. Call around to lenders first about the refinance and their guidelines. You don't want to be stuck with a HML and unable to refinance.
Thanks everyone! Those are great things to consider.