All Forum Posts by: Jerry Padilla

@Brian L Dowler

Do you know what the after repair value would be for all the renovations? 

I would consider a couple of options to keep your out of pocket costs as low as possible as well as increasing the rents and cash flow. 

One option is to remodel the property to get max rents and value - then cash out refinance at 6 months. For a 4 unit you could get 70% of the current appraised value back out to pay yourself back for the costs. 

Another option, since it looks like you have less than 4 financed properties, including subject you could also do a renovation loan on the property, that would allow you to incorporate the renovation costs into your loan and you would just have to come up with the down payment. 

Want to move faster with your cash out refinance on an investment property with conventional financing?

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 ) the renovation costs - and have them charged at closing...... This renovation cost now becomes an initial closing cost and can be included with the max that you are able to pull out prior to 6 months.

With this scenerio, Here is a quick example:

Purchase price: $100k

Closing costs: $5k

Renovation Money Escrowed: $45k

3 months the job is completed and you are now ready to refinance and get your money back.

New appraisal comes in at $200k

Your all in for $150k 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!

@Kyle Leto

A SFR primary residence will allow you to cash out refinance at 80% LTV. If it becomes an investment property before you refinance than you will be limited to a 75% LTV for an investment property.

@Derek Dewayne Hopson Jr.

I don't see you getting approved for any loans. You need to get your finances and credit in line first. With $1,000 that won't be enough for a down payment on an FHA or for closing costs on the property.

If your credit is low, it will be difficult to apply for any loans to use as a down payment for hard money or portfolio lending and may even drop your credit score more, bringing on new debt.

It does seem like a great deal, but I am guessing the property needs some renovation as well and that is the reasoning for the lower price.

My only thought is finding a cash partner on the project? You bring the deal and they do the financing .......

@Lance Francis

I would consider a 2 family with FHA if you do not have a large down payment. As mentioned you should be able to count the rental income from the other unit as well.

In NYC and other high cost areas, FHA can be difficult because of the self sufficiency rule which applies to 3-4 units. Rents typically aren't high enough at 75% to meet the ratio of covering 100% of the mortgage.

Home Possible has a low down payment option for multi-family properties as well, if you can find an area nearby that you would like to live and it is in one of the no income limit areas.

There are some portfolio options that I am aware of with low down payments on MFR if the properties that you are looking at are above conforming limits, and you were able to meet the other qualifications.

@Luciana Caballero

Why can’t you apply for a third mortgage? This will help better answer on how to structure the deal.

There are portfolio lenders that don’t look at your income, but look at the cash flow of the property or bank statements only versus your personal income, but you will pay a higher rate versus conventional financing.

@Ajay Malhotra

Since you are purchasing for the long term I think it is a great buy. You still have a lot of built up equity in the property, versus purchasing a property already renovated at market value.

@Ajay Malhotra

I see a few different options here.....

You have to do what makes the best financial sense for you and possibly explore all options.

You have a rental property with equity in it. If you plan on investing in more properties and keeping this property long term, You should consider tapping into this equity, for the purchase and renovation. When you renovate the property, and have another lined up or are ready to purchase the next, you can consider tapping into property # 2’s equity.

There are also renovation financing options if you own 4 or less properties including subject, so if you have the down payment available, this may be an option.

With any of the financing routes, I would try to go with a route that has a lower interest rate since it looks like you plan to hold the property from what I am reading.

@Reinaldo Lopez

Cash out refinancing on an investment property to purchase more real estate is a great way to utilize your equity to make more money. For a SFR you can cash out on 75% on the equity, based on current appraised value.

As far as your market, the locals can answer that question better. I feel the same here in our market. It is definitely a sellers market right now.

@Malcolm Chelliah

The closest program that I am aware of for Jumbo is a max of $250k or 30% of the as completed renovation value, for the renovation costs.

This program also doesn’t allow the borrower to use their own funds in order to exceed the allowed limit.