Equity credit line , or refi? A seller fiananced deal

6 Replies

I have a four unit I bought seller financed. It’s a 10 year 4% note. Great sellers have helped and treated me well.

I’m in the process of some value adds. Won’t be much longer till done and stabilized.

I am thinking of either refi or some sort of line of credit on the property in order to cash out and purchase another sort of BRRR it.

The sellers would rather me not refi at least not yet as they do not want to get whacked

In taxes when I pay them off. (Nothing in paper work that says I can’t though)

Now I probably sound like a softy saying I’d rather be nice to them and hold off on a refi, so what are my other options? I assume something down the road of an equity line of credit on the property? Are those like going through a refi, I’ve yet to do one

Thank you!

Tim from

Maine

10 years at 4% is gold. I wouldn't get rid of that loan if I could help it. If you feel you MUST, maybe talk with them about moving the loan to another property rather than paying it off.

I agree with @amanda g. You'd be hard pressed to find a lender that will lend on an investment property for less than 5% now. Is it amortized over 30 years? I would take out a HELOC and BRRRR for days :)

@Amanda G.

Thanks Amanda. Yeah it is a pretty solid deal... just for cash flow my mortgage with them is 2.5 more than my commercial lender would probably be. I probably need to start realizing the benefits to equity growth in the property other than monthly cashflow

@Frankie Woods

It’s amortized over 10 years. So my mortgage is significantly higher (cash flow less)

But maybe that’s worth the loan?

How would a HELOC work in this case I'll give some

More info below

4 unit Lewiston Maine.

3 , 2 bedrooms, 1 commercial space.

Purchase $155,000

So obvi seller financed $135,000 I put $20k down

Mortgage is $1366.81 monthly

With the way the market has grown here, and with the rents I am now getting and upgrading as we speak, current market value probably puts this place around $175-190k.

I bought this in

January.

@Timothy Swenton , I get that you want cash loose for your next purchase, but maybe look for other ways of raising capital and let this one ride. Everyone is in a big hurry, but it doesn't help to break something that is working while reaching for the next deal.

Originally posted by @Timothy Swenton :

@Frankie Woods

It’s amortized over 10 years. So my mortgage is significantly higher (cash flow less)

But maybe that’s worth the loan?

How would a HELOC work in this case I'll give some

More info below

4 unit Lewiston Maine.

3 , 2 bedrooms, 1 commercial space.

Purchase $155,000

So obvi seller financed $135,000 I put $20k down

Mortgage is $1366.81 monthly

With the way the market has grown here, and with the rents I am now getting and upgrading as we speak, current market value probably puts this place around $175-190k.

I bought this in

January.

Conventional mortgages require 30% down on 4-families. So, at the lower ARV ($175k) you can refinance into a $122.5k loan, which would mean you'd have to bring more money to the table. However, the new payment would be $685.96 @ 5.375% (I just refinanced at this rate with a 720+ credit score), cutting your current payment almost in half. At the higher ARV ($190k), you can refiance into a $133k loan which still requires some out-of-pocket funds to cover some of the closing costs, but ~10k less than the lower ARV. The new payment here would be $744.76. Both of these options would greatly increase your potential cashflow.

Since this is an investment property, there are only a few banks that would allow you to get a HELOC (e.g., PenFed and NFCU), and most will only allow you to pull out up to 80% of the property's value.

If I were in your shoes, I'd refinance now to get into a longer term loan with lower payments. It greatly increases your flexibility down the road, will significantly improve your DTI for future acquisitions, and will supercharge your savings rate for the next round. Not quite the "home run" BP members talk about, but this is nothing to snuff out. You're doing better than 99% of the "investors" out there...

Hope that helps!

Frankie

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