All Forum Posts by: Xavier A. Malave

 what do you think the value of the property is today?  That is the key piece of info to this whole thing. 

 @Xavier A. Malave    There are a few peices of info that will help answer your questions:

1. what is the property worth?

2. What do you owe?

3. When did you buy it?

4. For how much did you buy it?

5. Single family home or something else?

There of course is a lot more but that would at least allow you to get an idea of what might work for you. 

@Xavier A. Malave

 Not quite enough detail to fully understand…. But ultimately you have to leave about 20-25% equity in the property.  For a traditional loan you can bring this equity in cash but usually for a refi you can use the equity in the property (usually).  Some lenders are finicky /difficult about how they evaluate the new value on a recently purchased property.  If within 6 months of purchase one of our lenders insists on going with the ORIGINAL appraisal… totally defeating the rehab improvement value made to the property.

With that said, lenders will definitely flex their loan ‘buy criteria’ based on how much risk they perceive in the market in general, as well as various types of deals.  Cash out products are perceived as much riskier than non-cash outs, thus the reason for the higher interest rates on cash out refi loans. When the market is really turbulent some banks just won’t write them at all.  

Have you done any sort of new appraisal on the property to show them the value add to the property?  Most lenders will loan 70-80% of the appraised value (less any amounts owed on existing loans).

I would try reaching out to smaller community banks in your area. The bigger banks like Bank of America and PNC and Wells Fargo, etc. are definitely not as easy to work with on those types of loans. As a back up plan, you can also talk to the commercial lending side of the bank. They are often more able to have flexibility with that type of loan. We have done a cash out refi where we combined five properties into one loan just as an example.

Hope it helps!

Randy

@Xavier A. Malave thanks for posting. Always great to hear from a fellow Texan.  I also own real estate in Jacksonville, Florida.  Good market. Any reason why you aren't investing in San Antonio?  It's a bit closer to you and a good market as well.  But in either case, I would consult what your comparable properties say.  What do the comps show the value would be in either case?  Meaning, if there's no value change (and there might not be...but there might be) then there's no reason to wait on refinancing nor to refinance later.  I would encourage you to only refinance once - after all it costs money to refinance.  But consult those comps.  That will tell you what direction to go in.

@Xavier A. Malave If the rent from the main house is enough to cover the proposed PITI then you can hop into a DSCR loan now and just handle the garage conversion later on but most long term fixed rate debt will have SOME sort of prepayment penalty. You could consider doing a bridge loan now (12, 18, or 24 months with no prepay penalty) then convert garage and refi again into 30 year fixed debt (or something similar). The real questions is how much value does a garage conversion add (of course it adds cash flow but how much would it change an appraisal?)

@Xavier A. Malave - what does your current financing situation look like?  Does it allow you the time to do the garage and then refinance once?  My opinion is that would be ideal in regards to limiting your fees and increasing the amount of capital returned to you.

Because almost all costs of acquisition and rehabilitation expended prior to the rental being placed in service go towards the cost basis, I question why you have so many write-offs.   

I think it was because of the way with made Hardmoney loan.