I am trying to determine if the purchase of this house is a good deal for tear down and new duplex construction numbers are 105k for house $225k for renovations. ARV $450k. Using private money about 17k cost and looking to take 50k out after refi. Cash flow approx $538 a month. So a couple of questions. Will I find a lender to refi with 18% equity left. 2 Don't understand the 2% rule my calculations shows 1.02% and lastly 3. Do I have to hold 6 months in total or after renovation before refi. Thanks for all the help. First time using private money.
Taking $50k out is no problem if the numbers line up. I think you will have a tough time finding a lender that is willing to only let you have 18% equity. That would be them having less equity than a conventional mortgage. I'm not saying it is impossible, only that I think you will have a tough time doing it. We usually try to make our numbers hit 75% so that there is still 25% in the property. It makes our lenders happy to work with us again because we are making sure that the deal is easy for them to approve.
If your $538 a month is actual cash flow then I am happy with that. The 2% rule is a rule of thumb, and a lot of people really do the 1% rule. Especially since you would be new construction, I think it would be fine.
The 6 month "seasoning" period will be up to the lender that you do the refi with. They decide what they are willing to do with that. I've had some lenders be less and some lenders be more.
Thanks a bunch. I have room to reduce the cash out and lower the build cost slightly I will rerun the numbers to see.
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