Cash Out Refi Inquiry

6 Replies

Good Evening Ladies and Gents! 

First time poster, thanks in advance for the assistance! 

I recently completed my first flip in Anderson, IN and made a modest return. Looking back on the deal, tho, I think it would have made for an amazing buy-and-hold investment. Being relatively new to the REI game, I was hoping I could lean on one of you knowledgeable and savvy investors for some advice.

I have a private investor who is willing to finance the entire costs of my rehabs, this includes the purchase price of the property, for a very attractive annualized return. He is paid interest monthly on the principal and then paid in full once the property is sold. On my next investment, I would like to personally hold onto the property as a rental - If the numbers make sense of course. 

The properties will be bought under my LLC, House to Home Rehab, and then rehabbed and if I do my due diligence, I should have at least 20-25% sweat equity built into the property once completed. My question is, how would you suggest I go about pulling the money out of the property to pay off my private investor for the original loan?

Again, thank you in advance for your assistance and advice! 

Chris 

if your credit allows and the rental numbers stack up, I'd get the completed unit appraised and refinanced thro conventional financing. That way you get your investors money out and hopefully some of your sweat equity out and you can use that as down money for your next deal.

Hope this helps.

Good luck .

If your sweat equity pumps the ARV enough you can always do a 2nd mortgage (HELOC or Home Equity Loan) if it covers the private investor. But @Moses Wanjuki is right in just trying to get a conventional loan from a bank.  You might not even need to put a down payment on the property if you build up the equity enough, and just use the equity as the down payment.  Overall you need to go talk to the banks, community banks especially because they're a little more flexible, plus you'll be building a great relationship with that bank for future deals.

@Christopher Manus  You will have to wait for 6 months to get a loan with a new appraisal. At that point, the loan amount will be based on the new appraisal. So if you have enough equity built in you might only have to deal with the closing cost.

Keep in mind, the loan and title has to be in your name. It can't be in the LLC name.

Upen Patel, Mortgage Banker

Federal NMLS# 1374243

Good Morning! 

Thank you both for your time and advice here - I'm going to make a list of some local banks and start calling, hopefully I can find one that will work with me! Thanks again, gentlemen. 

Chris 

Good Morning Upen!

Thank you for the information, I was wondering if there were seasoning requirements and if the property had to be in my name or my LLC.

Quick followup question - These rehabs are not going to take 6 months to complete. Would you suggest that I move forward with filling the property with a tenant - I imagine that would assist with the bank's decision to finance the property, being that it's already generating positive cashflow. 

Thanks!

Chris 

@Christopher Manus - Yes, you will want to put a renter in the home before approaching the bank for a refi. They will want to see the lease agreement.

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