How to get cash out of Duplex renovation

Question

Purchased a duplex for 52k using an FHA loan (3.5% down). Mortgage payment is $300 a month. Put 55k of our own cash into it. New metal shingles, new windows, new bathrooms, new kitchens, etc. Basically a total renovation. We are living in one side and renting out the other side for $750 a month (14% cash on cash ROI). Rehab costs were a bit more than we anticipated but we are still happy with the COC ROI. The only downside is that we probably put a little too much money into it, as it would probably appraise for 100k.

What would you do in order to get some of the money out? I know with the purchase price and cost of renovation we can’t recover all of the money but it would still be nice to get 10-20k out for another deal. Is a BRRRR possible with an FHA loan? What about going the HELOC route? Anyone have ideas? Open to anything!

Dan M. · Answer

Did you ask the bank, it never hurts to ask aside from a ping to your credit score and they might not even run it if your in that bad of shape. Generally speaking all that matters is income/the ability to pay it back- credit only affects the rate. Make a couple of calls you may be pleasantly surprised. I'm from the mindset of if you do not ask the answer is always no.

Jonathan Steiger · Answer

@Dan M. @Jimmy Lieu thanks for your replies, sorry I just now saw them.

I was leaning towards a HELOC because of the closing costs required with a refinance. I want to do the HELOC now but I have some other things going on with my credit, etc. right now. Will most likely be ready for HELOC this spring.

Jimmy Lieu · Answer

It depends on what you're looking to do. I would definitely do a HELOC or cash out refi.

Which one are you leaning more towards right now and why?

Dan M. · Answer

You can do either. You can get a HELOC and keep your FHA or completely refinance out of the FHA. So looking at your numbers if your appraisal is accurate at 100,000 you could go either route for about 80,000 and "pull out" around 28,000 ( 80,000-52000). HELOC is nice because you can keep it open and use it / pay it down whenever you want. Though the closing costs of the refi you have to bear in mind too, hopefully what you would save in terms of interest rate reduction pays for those costs in a year or two. Hope this helps!

How to get cash out of Duplex renovation

Most Popular Reply