Austin, TX · Member since 2021 · 2 posts · 0 votes
Hi! This is hopefully a dumb question with a short answer: I purchased a quadplex with a VA loan (lived it in for quite some time). I no longer live in it and would like to do a cash out refi. A lender told me Texas does not allow a cash out refi on a VA backed loan for a property that I don't live in. Can anyone confirm or deny this? If that's true, are my only options to use the equity a home equity loan or 1031 exchange? Thanks!
Real Estate Agent · Dallas, TX · Member since 2016 · 432 posts · 341 votes
4y
@Garrett Kennedy you will need to refinance into a conventional loan and take a cash out refi at that point if you have enough equity. I purchased a duplex in 2017 and a quad in 2019 with my VA loans that still to this day have their VA loans on them because the interest rate is so low... it's not worth refinancing and taking cash out. The VA IRRL is also so easy to continue to refinance if rates are low (one I refinanced twice, the other once) and they're both sitting I believe at 2.25% for the next 28-29 years.
Real Estate Agent · Dallas, TX · Member since 2016 · 432 posts · 341 votes
4y
@Garrett Kennedy you will need to refinance into a conventional loan and take a cash out refi at that point if you have enough equity. I purchased a duplex in 2017 and a quad in 2019 with my VA loans that still to this day have their VA loans on them because the interest rate is so low... it's not worth refinancing and taking cash out. The VA IRRL is also so easy to continue to refinance if rates are low (one I refinanced twice, the other once) and they're both sitting I believe at 2.25% for the next 28-29 years.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
4y
@Garrett Kennedy I see you have a good comment above and I just want to emphasize a few points here:
1. To do a cash our refinance of a quad that you do not occupy you would be limited to 70% of the Value. So the property would need to have a significant amount of equity to even have a shot at this.
2. A 1031 Exchange means you sell the property....so yes, selling the property is always an option to take the money out and the 1031 Exchange would allow you to defer your capital gains taxes to a later date. Keep in mind that if you occupied the property 2 years out of the past 5 years that you do NOT pay capital gains taxes. So depending on when you moved out, etc. maybe you don't have to pay capital gains anyway.
3. A "Line of Credit" on on investment property is REALLY hard to find here in Texas. And if you do find it you will usually be limited to 70% of the Value of the property. So if your property was worth $100k, and you owed $65k, then your line of credit could be $5k. So same type of thing as #1...you would need a bunch of equity to make this route work too.
Anyway, feel free to ask anything additional here but hopefully this helps in some way. Thanks!
Investor · Flower Mound, TX · Member since 2016 · 245 posts · 192 votes
4y
@Garrett Kennedy - even if you occupied that property you would not be able to do a cash-out refinance due to TX50a6 (home equity laws). VA Cash-outs are not allowed in TX at all, and only a Conventional Cash-out (as a 50a6) would be allowed. However, in your situation, even if you occupied this 4-plex you still can't do a Conventional cash-out because 50a6 rules only allow a TX cash-out on a 1-unit property.
As Kenneth mentioned, a VA IRRRL might be a good option. Or as Andrew mentioned, you could do a cash-out up to 70% LTV, if you do not occupy the property.