All Forum Posts by: Jerry Padilla

The typical waiting period for a cash-out is 6 months.

You could do it sooner with delayed financing if you paid cash - with the restriction of pulling out a max of the purchase price plus closing costs before 6 months. Delayed financing, you still go according to the property's current appraised value.

Now, Here is the Catch!

You are subject to the initial investment cost to acquire the property. 

With this scenario, Here is a quick example:

Purchase price: $100k

Closing costs: $5k

New appraisal comes in at $200k

You are all in for $105k at closing, and your new loan amount could be 112k to cover all closing costs.  This would make your net proceeds $105k 

For an SFR at an LTV of 75%, you can cash out the total amount of $150k (outside of 6 months)

For an MFR at an LTV of 70%, you can cash out $140k (outside of 6 months)

In this scenario, if you paid cash, you could recoup your investment for the same amount of money as you would have into the deal.  

Now let's say the property was valued at $300k

You will still only be able to pull out a max of $105k as that is your initial investment. So at this point, you should wait until the 6-month mark to cash out more of your equity. The good news is you have already started the process and can cash out at 6 months and 1 day!

Here is a post with more info. on Delayed Financing;

https://www.biggerpockets.com/member-blogs/5110/46871-buy-rent-rehab-refinance-cash-out-refinance-delayed-financing

@Rich Emery - If you don't have a separate business tax return for this LLC, then the private loan note will need to be disclosed to the lender. However, if the LLC is part of a partnership or S corp business returns, all properties would be treated as a business versus rental income calculation. Those properties would not need to be disclosed on the application. Ultimately if you have the property on your individual tax returns via Schedule E, this would still make you liable for all debts. So if the property title is your personal name or LLC, it doesn't matter in the underwriter's eyes for the analysis of DTI. What matters to an underwriter is the liability on a business return or individual returns.

@La'Terrius Campbell

Do you have a particular reason for going with a 203k loan? Is the property a multi-family? Conventional loans also have renovation options. Depending on your scenario will determine the best program for your needs. I will gladly answer any questions you may have on renovation loans.

Hi Eaysha, 

I believe it's best to talk with a Loan Officer who has experience with the house hacking method. If they aren't aware of this strategy then it maybe best to move on to the next lender. I can answer any questions you may have with FHA loans and possible other conventional loans that could work for you as well.

I would suggest finding a W-2 job first before making the leap in real estate investing full-time. Once you start real estate full-time, then you will have a two-year waiting period before any conventional lender looks at your income. If you find a W-2 job and do real estate investing at the same time, then you can still get conventional financing. Having both jobs is going to be tough, but it will provide you with financial stability, especially in this current market. Hope this helps!! 

 The typical waiting period for a cash out is 6 months.

You can do sooner with delayed financing if you paid cash - with the restriction of pulling out a max of the purchase price plus closing costs prior to 6 months. Delayed financing you still go according to the current appraised value of the property.

Now, Here is the Catch!

If you include on your closing statements (which vary state to state - HUD-1/ALTA statement )

With this scenerio, Here is a quick example:

Purchase price: $100k

Closing costs: $5k

Renovation Mo

 New appraisal comes in at $200k

Your all in for $105k at closing.

For a SFR at an LTV of 75% you can cash out the full amount of $150k

For a MFR at an LTV of 70% you can cash out $140k

In this scenerio, if you paid cash, you could now recoup your investment for the same amount of cash as you would have, if it would have been after 6 months since you weren't limited to the $105k if the renovation money wasn't escrowed.

Now let's say the property was valued at $300k

You will still only be able to pull out a max of $150k as that is your initial investment. So at this point you would want to wait until the 6 month mark to cash out more of your investment. The good news is, you already started the process and can cash out at 6 months and 1 day!

Here is a post with more info. on Delayed Financing;

https://www.biggerpockets.com/member-blogs/5110/46871-buy-rent-rehab-refinance-cash-out-refinance-delayed-financing

Today’s Rates Are Very Low. Now is the time to consider refinancing your primary residence as well as investment properties! 

Maximum Loan Limit Look up for your area can be found here;

Look Up Conforming Limits For Your Area!

• Current appraised value is used to determine LTV
• Property must not be for sale, and must be taken off the market on or before the disbursement date.
• A Rate & Term Refinance can be used to pay off existing unpaid principal balances on the subject property, closing costs, prepaids, and points.
• No seasoning requirement.

Freddie Mac and Fannie Mae are both conventional lenders. They each have their own set of guidelines to be followed. There are investor friendly lenders that are able to specifically follow just one set of guidelines below. Below are the required LTV for Rate and Term Refinances.

Freddie Mac - min credit score : 620 - up to 6 mortgaged properties

Fannie Mae - min credit score: 620 - up to 6 mortgaged properties

Min credit score: 720 - 7-10 mortgaged properties & minimum loan amount of $50k at property 7 and above.

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for a Primary Residence;

• 95% for 1 unit
• 85% for 2 unit
• 80% LTV for 3-4 units

THESE ARE FOR MORTGAGED Properties 1-4; For Fannie Mae, a Rate and Term Refinance for a Primary Residence;

• 1 unit - 95%
• 2 unit - 85%
• 3-4 unit is 75%

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for an Investment Residence;

• 80 - 85% for 1 unit and 75% for 2-4 Units..... Up to 6 mortgaged properties allowed.

THESE ARE FOR MORTGAGED Properties 1-10; For Fannie Mae, a Rate and Term Refinance for a Investment Residence;

75% for 1-4 Units

Fannie Mae Guideline for Rate & Term, Mortgaged Property 1-6.

Fannie Mae Guideline for Rate & Term, Mortgaged Property 7-10.

Freddie Mac Guideline for Rate & Term.

Cash Reserve Requirements;

6 months PITI is required on subject property.

If you have 1-4 financed properties than it is now 2% of all unpaid principle balances.

If you have 5-6 financed properties than it is now 4% of all unpaid principle balances.

If you have 7-10 financed properties than it is now 6% of all unpaid principle balances.

Money must be in account for 60 days or sourced. A HELOC can be used as down payment, but not as cash reserves.

Acceptable Sources of Reserves; Cash and assets that are liquid or near liquid

• Checking or savings accounts
• Investments in stocks, bonds, mutual funds, certificates of deposit, money markets funds and trust accounts
• The amount vested in retirement savings accounts
• Cash value of a vested life insurance policy

  Certain assets must be “discounted” when used for reserves. Terms and conditions of liquidation may be required depending on the asset used for reserves.

  Assets Requiring Liquidation
  The following may be counted as cash assets at 100% of verified liquidated amounts:

  • Cash value of life insurance
  • Publically traded stocks
  • Bonds
  • Mutual Funds
  • U.S. Government Securities
  • Savings Bonds
  • Retirement Funds
• Gift Funds - Primary Residence and Second Home ONLY

@Stephanie Simmons

Congrats on your financial position. Looking at what you posted, I don’t see an issue with getting approved. If the property you choose doesn’t qualify for traditional conventional financing, there are renovation loan options as well, depending on how many mortgages you currently have.

Traditional Conventional financing allows you to go up to 10 financed properties. After 10 financed properties, there are portfolio options.  

Leveraging your current cash flowing  properties is a great way to get another investment property and how a lot of investors continue scaling.

You can cash out up to 75% LTV on a SFR and up to 70% on a MFR.

It sounds like you have a great plan in place. Let me know if you have any financing questions!