Cash out loan verses traditional mortgage

5 Replies

I'm going to buy 2 condos in 2 different cities where my kids go to college.  I can pay cash for the first, but it will eat up all of my capital.  So should I pay cash for it and o the $5000 in repairs so I can close quickly and get bottom dollar and then take a cash out mortgage to buy the second one since it will then appraise for more OR should I just finance each condo separately? 

@Cheri Banet  To do a cash-out at a higher value, you have to let the purchase season for 6 months. Only then a new appraisal can be ordered and the loan be based on the appraised value.
Originally posted by @Cheri Banet :

I'm going to buy 2 condos in 2 different cities where my kids go to college.  I can pay cash for the first, but it will eat up all of my capital.  So should I pay cash for it and o the $5000 in repairs so I can close quickly and get bottom dollar and then take a cash out mortgage to buy the second one since it will then appraise for more OR should I just finance each condo separately? 

Can you give more details on both such as condition, HOA fees, what the $5k is for in repairs?

How about a duplex where your student lives in one side and the other is rented thereby creating a way to get rent towards the note? 

I also recently read here in the forum about a parent buying a multi and having their student living in one unit and renting the other(s) and getting the financing at less than the 20-25% required. Parent is considered a non-occupant and student is the occupant that somehow qualifies for lesser down payment. I can't remember all the details but I'm sure others who have done this can chime in.

@Upen Patel Thank you for your response.  @Daria B  the area where we want to be is very limited for any real estate for sale in my price range.   He will be renting out 2 of the 3 bedrooms to other students for income to cover the mortgage.  The unit above had a flood so ceilings need to be painted and the unit itself had a flood and needs flooring replaced. It won't really cost $5000 since we will be doing the work ourselves.  That was the contractors estimate from the broker handling the listing.  It would be nice if I could qualify for a lower down payment with him being the occupant. So I could also fit another flip into my budget this year. I appreciate the help.

@Cheri Banet  I am no long-term expert, but have had some experience in this and done well. I would always recommend financing with a traditional 20% down on a 30 fixed, putting money in it to add value, then refi-can out after 6 months seasoning period. Less cash out of your pocket and you may even end up with little to none of your own cash in it. If you decide not to refi it, you will have much equity and good cash flow, with a pre-made exit strategy as well. Hope this helps. 

Does anyone know if I can finance this as second home since my son will live there and I will actually live there about 4 weeks or so out of the year since I have an office in that town w my W2 job. I would like to put as little down on this one so I can purchase the second one.