Refinancing to build new construction and rent it out.

9 Replies

If i was to refinance my home for 100k and build me a new construction for 80k and rent it out for $1200 and refinance the new construction for 100k and build another new construction for 80k and rent it out againg for $1200... would a time come were the bank wont refinance your new constrution? even if the market value of your new construction is way higher then what you are asking to refinance it for.  Im planning to invest next year and im trying to get as much info as possible. thank you in advance for your information.

be aware of the shortage of skilled workers in the construction trades. The price of skilled labor as I understand it is about 40 percent of your costs, and in our area some general contractors have been rudely surprised in mid project to have skilled trades go to other states to do higher paying jobs.

im working on creating a web of sub contractors, which most of them are friends of mine... im a barber and everyday i have clientele that work in construction, i know builders,sub contractors , general contractors, remodeling contractors im also a former construction worker.. i know alot of skilled workers that only work around the area.. my question was if i can refinance using every new construction as leverage and is there a limit to it...? i have heard on mortgages that you can only take 4 out before lenders stop lending you loans... thanks for the input Joseph ill keep that in mine..

@Benito Pruneda if you get beyond 4 then it is a good problem to have and you will probably need to find a portfolio lender. There are tons of them... ask some of the big investors in your area who they use and like. 

@Teri S. thanks Teri, yes thats what i read in one of the books and also aswell looking and building  a portfolio lenders. Im just making sure i have all the right info before i moved forward with the investment. Thank you.

10 loans, loans would be based off apprisal price.  But.... If it's new construction you could in theory have a hard time with apprisal value if there's a lack of comps.

You're also going to have closing costs in addition to LTV limits.

So if you're say 80k into new construction and it's worth 100k you could pull your money out sans closing costs. But if apprisal comes back at say 90k, you're only getting 80% of that.... Plus closing costs.

There's some ways around this but get to 10 first...

Originally posted by @Joseph Dunphy :

be aware of the shortage of skilled workers in the construction trades. The price of skilled labor as I understand it is about 40 percent of your costs, and in our area some general contractors have been rudely surprised in mid project to have skilled trades go to other states to do higher paying jobs.

 Political climate is not helping either in many major metros... Even unskilled labor is expensive and can be harder (or really more expensive) to get..

Thanks @Matt K. , what i meant i can build this 1100 sf  around 80k but the market value will be around 130k-150k depending on the area but i will only refinance 100k so i can have a comfortable $500 dll mortage not including taxes and Insurance and i can rent it for $1200  and than refinance this new construction even if the value of it is higher at only 100k so i can build me another one at 80k and put 20k to the side. And repeat the process.

Originally posted by @Benito Pruneda :

Thanks @Matt K. , what i meant i can build this 1100 sf  around 80k but the market value will be around 130k-150k depending on the area but i will only refinance 100k so i can have a comfortable $500 dll mortage not including taxes and Insurance and i can rent it for $1200  and than refinance this new construction even if the value of it is higher at only 100k so i can build me another one at 80k and put 20k to the side. And repeat the process.

 I get what you meant, but if it's the only new house or higher than others and appraisal might suprise you. Not impossible to work with but worth paying attention to. Low apprisal and overrun on construction could be bad...

@Matt K. i see what you mean. Im going to look for empty lots were there is already houses around it and check their market value, and go by them. I also take in consideration the square footage around the community and the rent. Thanks for the info brother.

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