cash offer, then re-finance?

[Mary Hoyt]

Hey guys,

I want to run this by you - what do you think?

We have access to a low interest loan of up to 50% of our 401K.

The appraisal on the triplex we've been under contract on at 71K just came back at 21K - what? b/c of lack of comps in the area?

We're considering offering 50K - or 51K - seems like a reasonable enough offer for them to accept or consider accepting. 40K would be from our 401k, 10k cash on hand (and we have the 6k cash on hand for the closing cots on the cash sale and on the re-fi).

Then we would re-fi/re-hab based on the appraisal:

I feel really good about the after-closing side of it b/c we've been under contract for 5 weeks and have fine-tuned our cash flow projections and we are in an area with a high-demand/need for additional housing of the size/price this triplex will offer our community - already have many interested tenants as projected rent level.

here's the budget:

cash offer 51,000
we put in 10,000
401K loan 40,000
cash closing 1,000
re-fi closing 5,000

Re-fi/Re-hab loan
15,750 borrow 75% of appaised as-is value (21,000)
28,500 borrow 75% of construction cost (38,000)

44,250 cash comes to us
14,750 cash equity still in the house

7800 pay other 25% of construction
36,450 pay back 401K loan (still owe 3550 - 5 yr 4% loan)

seems way too good to be true - no wonder you guys get addicted to this!

this has been a crazy, crazy ride, and it's far from over...i'm a social learner, so I'm very thankful for Bigger Pockets and all you have already taught me!