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My wife and I are looking to cash out refinance our rental property in Richland, WA to further expand our rental portfolio. I am a GC in the Tri-Cities WA area and we currently invest in New build residential spec homes for sale and have been using private money. That being said, we would like to add rentals to our portfolio and take advantage of the low interest rates to unlock the equity. The home has been renting for 4 months now and has about $230,000 in equity. This is our first rental property so I can see why banks have told us to wait 2 years before we can cash out on an investment property being that we are new to this part.
So our question is, Are there other options to use this home to purchase future rental properties? If so, what are they? Any insight is helpful and much appreciated.
@Paul Ivanov have you talked to local banks that would keep it in portfolio? Their rate would be higher but they may let you refi which would give you access to the equity. Then you could refi into secondary market after the 2 year mark.
Thank you Lee Judd, yes I have but I am also wondering if they are seeing a high debt to income ratio. I will continue looking at other local banks and other lending options.
@Paul Ivanov , check with Jamin Clark at Community First Bank. He's the Sr. VP and Mortgage Department Manager. He's doing a couple of cash-out refis for me right now on investment properties. Two thumbs up from me so far! Good luck! I'll PM you his contact info.
@Paul Ivanov , does the fact that this "new" Rental already has $230k equity mean that the amount of your own dollars in the deal is not much shy of that amount?
Are you also saying that the rent you receive from it isn't helping your DTI ratio?
Ultimately, you have to play by Lenders' Rules, and often that means: having patience.
Yeah yeah, I know, you hate that word! Good luck...
@Marcus Burleson I will give him a call. Thank you very much! I appreciate it.
@Brent Coombs we owe $220k on the house and current market value is $450k.
The banks we have reached out to have said that our DTI ratio is high and they won't count the rental income until we've seasoned for 2 years as property owners. So for now the rental is showing just debt. I was hoping there is another way around or a lender that does not need to see the 2 years.
Patience has been difficult but necessary part of my learning experience so far.
@Paul Ivanov , I'm curious as to why you put as much as 50% down to begin with? If the same issue applied then as applies now, what made you think you might be able to skirt around their issue so soon thereafter?
I'm also curious: how would its cashflow look like if you did owe another $110k on it?...
@Paul Ivanov , Give me a call when you have a minute, and I can walk you through how I got started. I was a W2 construction worker in '11 and '12 when I started to buy and hold, and after the recession, Fannie May and Freddie Mac changed their lending procedures for construction workers; they basically treated us as business owners and used our AGI rather than our gross, which created a hurdle for me. My cell number is in my signature.
@Brent Coombs we built the home in 2018 with $73k down for land as down payment and 233k at the time for the loan. With 2 years of down paying the loan, we are down to $220k for loan amount. We built the home with some sweet equity which helped keep costs down. The home value is now showing $450k based off similar comps in the neighborhood.
$73,000 Land (Cash invested)
$450,000 Value of home
=$230,000 Total Equity
Cashflow would be roughly $250/ month if we got 80% of equity which would drop it significantly lower but with the cash out refi on hand, we would be able to pickup the next deal.
@Marcus Burleson I will give you a call shortly.
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