Cash out Refinance with home appraised >$50k

[Zack Clopper]

Hi All,

Looking to buy my first investment property in PA and was looking to fund the deal with a Unsecured Personal Loan around 8.50-9.25% interest and the property is 40k. I was going to offer 25k cash and 2 week closing after I had the cash in my account assuming inspection came back good. The house does need very minor repairs such as paint, vinyl floor is pealing up in a few rooms and dining room has wood panel walls I was going to dry wall instead.  I can do all that work myself and not worried about that but even then the house will be worth less than $50k.  Similar houses on this street and surrounding streets have old in the range of $35-45k in recent months most needing repairs.

The rent will go between $750-800 according to a local property manager in the area. If I did the unsecured loan for 6 months at 9% the below is what the cash flow situation would look like:

Loan Pmt: $470

Taxes: $102.35

Insurance: $85

Vacancy: $60 (750 x 8%)

Repairs: $37.50 (750 x 5%)

CAPEX: $56.25 (750 x 7.5%)

Rental License: $40 (yearly)

Property Manager: $45 (750 x 6%)

Rental Income: $750

By doing this I would net (-$108.16) or (-71.41) if rented for $800 for the fist 6 months assuming I can get someone in there within a month to pay all the remaining bills. If I am able to do cash out refinance to pay off the loan with a 5% I/Y and 30 year term would net over $200 per month.

Does anyone know if I can do a Cash out refinance on a property that would only appraise at $40,000 (low end) and assuming they only give me 75% LTV which is $30,000.

Last point the only reason I am looking into this route is I do not want to tie up all my own cash in this project so looking at my other options for small loan amount.

Thanks in advance.

Zack