All Forum Posts by: Joshua Nudell

@Sam - It sounds like an interesting idea. There are things to consider, like closing costs on a refinance with cash-out. And you would need the owner to agree to get a specific type of loan as well (I'm not sure how many banks offer assumable mortgages). I believe that the only assumable mortgages left are FHA mortgages, which means higher fees on the mortgage closing because of FHAs new rules.

@Curt - Are you sure that your information is correct? When I refinanced my house through Wells Fargo, using FHA to do a renovation loan that converted to a regular 30 year, it was assumable after that. Yes, the buyer would still have to qualify for the mortgage in terms of creditworthiness, but he wouldn't have to come up with a down payment if he was just assuming the mortgage.

I think the main thing is going to be convincing the seller to refinance with cash-out on their home, unless they're motivated and willing to work with you.  Again, there are closing costs to consider which could be a couple of thousand dollars which you have to determine who will be responsible for paying those.

-Joshua

@Curt - Thanks for your response.  That makes sense if it appraises at that level.

@Elizabeth & K. Marie - I appreciate your input.  I've heard that people do that, and have even had real-estate agents and other people say that you could always have "intended" to live somewhere, but changed your mind at a later date.  You're right, however, I don't need any gray areas and would not feel comfortable with a situation like that.

@Drew - The $140K is a bit of a stretch I admit, and that was my high estimate.  I do however see plenty of listings for $100 - $120 for duplexes in mediocre condition, and anything under that I have looked at are in pretty bad shape and in less desirable areas.

Is anyone familiar with what kinds of terms a new entity (LLC) with no credit history could get for a cash-out refi (50% LTV @ +1-2% over residential rates, etc)?

-Joshua

Hello BP community,

I am a new real-estate investor, but have always been interesting in real-estate as a means of achieving financial independence and security.

I have recently begun researching properties in Northeastern Pennsylvania (learning the rental market, home values, economic situation, etc) and have recently found a property that I feel would be a good first start for a buy & hold.  I have made a cash offer for the property, which has been accepted and the inspection has turned up some minor, but expected issues, and no major issues.

My question is, what is the best way to pull my cash out the property after I have renovated and fixed it up and have it rented out?

Here are the property details:

2-family unit (side-by-side) with two 3 bedroom units.
Previous rental income of $750 per unit.
Purchase price: $70,000 + associated closing costs (approx. $74,000 all told)
Taxes: $1640
Water: $600/year
Sewage: $360/year
Insurance: not sure yet, $1200?
Separate meters for gas & electric. 
Separate hot water heaters.

I will put about $20,000 into renovations to get the units rent-ready.  I'm not sure what the property will appraise for after renovations, but I estimate in the area of $125,000 - $140,000.

At that point I will be into the property for $95,000 in cash.

Doing the research on traditional financing  I have discovered that I have two options (three if I declare that I am owner-occupying the property); 1. Residential investment mortgage or 2. Commercial mortgage.  One of the problems I encounter when researching mortgages is that a lot of lenders don't deal with mortgages under $500K for commercial, so any leads on lenders that will work on small mortgages will be appreciated.

If I say I am owner-occupying this property, then I can qualify for certain refinance options with cash out (most conventional being 80% LTV maximum, with FHA maxing out at 85% LTV with the current rules).

I don't mind having my money tied up for a short period of time, but I would eventually like to move on the next property once I'm finished with getting this one rented out. I have not closed yet, but I have to buy the property in a cash purchase (could probably arrange a HML until I secure financing, that's one way I suppose.)

Does anyone have any recommendations or suggestions on how I should eventually have this property financed?  Ideally I would like to have 0% - 5% of my money in it, but with the cash offer, some of the purchase loan options that usually provide this level of personal commitment are off the table, right?

Thanks for reading!  I look forward to reading responses from more seasoned real-estate experts!

-Joshua

Hi Matthew,

I'm a newbie in real-estate investing, but I was wondering why you would live in the bigger unit instead of the smaller one?  It seems like you would be able to live practically rent-free in the small unit, but no in the larger one.

-Josh