Cash out REFI???? Why haven't I heard of this?

Question

Hello,

I just picked up a rental income property about 2 months ago. Now I'm looking for another. I heard about cash out refinancing the other day and I want to see if its worth it to think about on my current rental.

Heres what I got:

I purchased this property at $73,250 two months ago and put down over 30% and used a conventional mortgage amount of $50,000.

It appraised at $75K during the sale.

Since I have taken possession I put in all new carpets and it is now occupied by tenants and is cash flowing $650/month.

Of course I still owe $50K on the property.

Experts..... is a cash out refi a viable option for me to collect cash to put into another property? Im all ears.

Account Closed · Answer

I think cash out refi's so soon after closing a deal only really make sense in a rehab with lots of forced appreciation and you can get your original down payment back?

Jon Holdman · Answer

When you close on the refi you would get a check for about $10K.  Most of the proceeds from the new loan will go to pay off the old loan.  You start paying on the new loan per the loan terms.  The new loan terms will likely be similar to the existing loan terms.

Because you're doing this only two months after the original purpose, the new lender may use the price you paid, $73,250, for the value, as long as the new appraisal is higher than that.  You typically (though not always) need to wait at least six months before the new lender will use a new, higher value from a new appraisal.

Steve DellaPelle · Answer

@Vincent Plant This will depend on what the property would be appraised for today. Most lenders will do a cash out refi up to 85% LTV.

If your property is still worth $75,000 then you can only take a loan of  $63,750. This would leave you with around 10k in cash after closing and paying off your existing loan!

Steve DellaPelle · Answer

@Vincent Plant

Property Value = $75,000

85% of $75,000 = $63,750

Current Mortgage = $50,000

$63,750 - $50,000 = $13,750

Less Closing Costs, Etc. You're Looking At ~10k in Cash

Eric Adobo · Answer

Probably not. Your appraised value after your new 🚗 pets is what $77,000?.

I don't  see how you have any forced appreciation of any significance.

Your new appraisal needs to be, $100,000 ,I'm guessing, to be a cash out candidate.

Cash out REFI???? Why haven't I heard of this?

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