Cash-Out Refi in Inherited Multi-Family

7 Replies

My family and I (5 Heirs) inherited a property in NY that was appraised in 2014 at $2.4M and only has a $106K mortgage, (equity = $2M+) which is up to date. 4 of the heirs, including myself, live in the property as well as my mother. We have a tenant that pays only $1800 per month, but are looking to increase the income by charging all heirs a monthly rental rate.
We do not want to sell it and want to take out up to 35% equity ($840K) to pay off mortgage & estate tax, renovate, pocket $10K each, create an emergency fund, place up to 2 years of mortgage payments in escrow, and invest in flip and holds in Atlanta, Ga.
Which type of loan should we take out? (HELOC, HEL, Private, or some form of creative financing)
All suggestions are welcome.

@Christopher Jones you could do a line against it and use it as needed like a revolving balance credit card. Or you could do a cash out refi at a low LTV. Both have advantages and disadvantages. It sounds like as of now you're not entirely sure why you want the money (or don't have an immediate need for it/properties found ect) so that somewhat lends me to think a line would best suit you but it's hard to say without knowing more.

Not enough info. 

Is this 1-4 unit?

Has property been distributed and now vested in all (5) as record owners?

Is there cash flow / income to support an $800K loan?

@Christopher Jones

Welcome to BP!

As Rick mentioned, we don't have enough information. Need answers to Rick's questions.

Any loan will be based on your ability to pay, the cash flow from non-owner occupied properties or 5+ unit properties. Doesn't sound like you'll have that with family living there free. 

Next issue, family on a lease, a lender will want at least a year track record of actual payments, renting to family isn't an "arm's length" contract, a lender may want 2 years payment history. 

Sounds like you're holding title as Tenants in Common now. Each owner may be able to finance their interest on their own after you put a TIC Agreement in place. Going this route you'll have an owner occupied loan(s). A line of credit may work for you as Derek suggested.

If you want to re-finance or finance this, don't list it for sale, lenders don't like making loans that might be paid off before the first payment is due.

Taxes will need to be paid before or at settlement of any loan.

Need more info. :)

Originally posted by @Rick H. :

Not enough info. 

Q: Is this 1-4 unit? A: 3 Unit

Q: Has property been distributed and now vested in all (5) as record owners? A: Property has not been dist. 

Q: Is there cash flow / income to support an $800K loan. A: Currently, No! There is however only $1800 monthly being paid by a long time tenant. (Plan to renovate this apartment to generate rental income of $2300 per month. Myself and 1 other heir are able to pay an additional amount of our incomes for a combined total of $3K. That brings us to $4800. The other family members living in the property will also be paying some form of rent to make up the balance needed, or 1 of the remaining units will also be renovated and rented to an outside tenant for an additional $2200 per month. However, I am not sure as to what they can afford as of this posting. Lastly, to create even more income, a portion of the loan we are seeking is to convert the first floor of the property to a day care facility, as well as invest in either several flips and holds to generate even more income.

It's already been agreed that myself and only 1 other heirs be placed on the Deed and the mortgage.