All Forum Posts by: Craig Gordon

I'm looking to buy properties with cash and then get financing to pull my cash back out. I would be purchasing rental properties (duplex's and possibly small apartment units). These properties would not be owner occupant but under LLCS. The banks I talked to so far just don't seem to have the answers for this type of situation. From what I gathered by reading some posts around here is that the method I may be interested in is cash out refinancing. I'm looking to gain some clarity on if this type of financing is eligible for investment/LLC situations as again, I won't be living in these residences. I'm also looking to understand what type of rates are typically available, are they higher than conventional mortgages, are they comparable to a commercial mortgage as if I was to finance a investment property right out of the gate? What are the lengths of term available, is 20 or 30 year an option? I'm eyeing up properties that I should beable to make some repairs and appraise higher than the purchase price and repair costs. I'm not looking to finance beyond the cash I put into it, but an ideal scenario would be to finance out 100% of that money back out or as close to as the deal allows.

It seems you have to wait 6 months in order to cash out refinance, that can work for me but something like 3 months would allow me to move along into other investments quicker. Are there any other drawbacks or things I should be aware of when considering this type of financing?

I also have the cash to purchase 2-3 properties at a time. Would there be any snags trying to close on financing on multiple properties at the same time. I would have to imagine separate LLCs could avoid that if it is even an issue to begin with but definitely something I would like to have certainty on.

Any other input is much appreciated!

Thanks!

2 Votes

Green Bay, Wisconsin

Quote from @Eric Veronica:

If you want to wait 6 months then you can get a cash out refinance pretty easily. If you are not interested in waiting 6 months this is pretty do-able with a delayed financing cash out refinance.

If you wish to finance the property in your own name then have your family member lend you the 70% that you need to purchase the home. Create a promissory note between you and your family member. Close the home in only your name. Then use the 30% you have in addition to the loan from family to purchase the property with cash. After you close on the home you can start the mortgage application for the cash out refinance. When you close the cash out refinance the proceeds will be used to pay off the family lender who let you borrow the funds. Any excess funds will be given to you.

IMPORTANT CATCH.....If you are looking to close the loan before you own for 6 months then the loan amount cannot exceed the acquisition price plus closing costs. For example, assume the home purchase closes on February 1st with the original purchase price plus closing costs of $50,000. Then a month later you are are trying to refinance and the appraisal comes back with a value of $100,000. Since you have not owned the property for 6 months you will be limited to a max loan amount of $50,000 (plus closing costs). If you wait to close until August 1st you will have 6 months ownership and you can pull out the full amount. Currently Fannie Mae allows cash out refinances up to 70% of the appraised value on 2-4 unit investment properties and 75% on single family investment properties.

I am also in the same situation. I have cash and can wait the 6 months for financing. I am wondering what type of interest rates you are subjected to going this route? Are they typically higher? Is this a method I can utilize if its an investment property under a LLC or can one only apply for this type of loan if its a owner occupant situation? I called a few banks over the last few days and just have not been able to get any real answers.

I'm in a situation where I would be looking to buy 2 properties at the same time and would want to get my cash back out of them both.

Any other insight would be much appreciated, any information on expenses associated with this or any drawbacks that might not be clear.

0 Votes

Wilkes Barre Scranton, Pennsylvania

All Forum Posts by: Craig Gordon

Craig Gordon has started 1 posts and replied 3 times.

Post: Buying rentals with cash but want to finance my money back out

Post: Buying rentals with cash but want to finance my money back out

Post: Buying a property all cash, with intention to cash out refi