Cash out REFI options (several properties)?

Question

Good afternoon,

I've been an active RE investor for several years now and currently own 7 single family detached rentals. Each property is mortgaged and has a fair amount of equity at this point. I'm looking to cash out refi, but lenders are taking issue with my personal income. All of my rentals have been cash flow positive since we took ownership and my vacancy rates are sub 10%. I can show upwards of 5 years history on almost all rentals. Finally, I have 6+ mo cash reserves for all rentals. In the past, I've not had any issue getting investment loans and found it somewhat odd they are looking so closely at my personal income, but I've heard lenders are being more conservative lately.

Does anyone have any recommendations for how I can go about finding a lender that will work with me based on the equity and cash reserves I have? Note, I'm not looking for lender recommendations at this point as it appears that would be against the rules. Of course, I could sell the rentals to pull the equity out, but would prefer to refi.

Edward B. · Answer

@David Lee, I used Lima One Capital recently to do just that. They didn't even pull my credit I don't think. Did a cash out refi on four different properties in NC and put them all under one loan. It is not inexpensive, but I thought the rate and terms were fair.

Edward B. · Answer

@David Lee, I had the properties in an LLC already and it is ironic because a lot of posts on BP are people wanting to know how to finance properties in an LLC. Well, that is one. I also wanted the blanket loan. So my options were a commercial loan at 5%-6% but amortized over 20-25 years with a balloon in 5-7 years or Lima One with a slightly higher rate but a 30 year fixed loan. The trade off was worth it to me because the 30 year amortization meant a lower payment and I would not have to worry about where rates would be when the balloon came due (I'm guessing higher).

If you don't go this route and/or want the lower rates and better terms then you are looking at government backed products. There is no way to avoid your personal income issues with those. Additionally you will be doing 7 different cash out refis. That in itself will get expensive and complicated. If you can find someone that will lend on over 10 properties I am sure they will be happy to work with you if you can make the DTI work because they will make a killing on all of those loans.

Bottom line, it's gonna cost you, you just need to decide how you want to pay and to whom.

Mark Ebinal · Answer

We were in a somewhat similar situation, being told by our bank that we've been with for a loooooong time that there is no way to do a cash out refi on a business property like a rental.  However.... when I talked to a local credit union, they had absolutely no issues with doing so.  That was almost 1 year ago and I've been steadily giving them more and more business.  So I would start calling your local credit unions.

David Lee · Answer

Thanks Rush. I'll call around and see what they say.

David Lee · Answer

Thanks Andrew! I'll post over in the GA forums as well.

Andrew Postell · Answer

@David Lee and @Mark Ebinal sounds like you have some good suggestions here already. I would also encourage you to ask this question in the state specific forum here at Bigger Pockets.  So if your homes were located in Georgia, then just go to the Georgia forum and ask who are some good lenders who will do this.  Usually some good local people in those forums chime in about some local banks they work with.  You can also seek out some investor networking groups in your area to see what some other groups are doing.  Meetup is a good site to start looking but even a google search should point you in the right direction.

You can ABSOLUTELY find lenders who will do these loans.  Good luck!

David Lee · Answer

Ohh ok. Well that's good to hear then.

Grant Rothenburger · Answer

@David Lee Funny you say that lenders are getting more strict - I've heard the opposite. Sounds like you just need to try some other banks. Maybe smaller local banks, usually easier to work with but higher rates.

David Lee · Answer

Agreed. Thanks for the feedback. I'll figure something out. Like you said, it's just a question of where I want to take the hit.

Cash out REFI options (several properties)?

Most Popular Reply