Cashing out to buy another property

[Ryan Mackfee]

Ok...so now I have three rentals and they cash flow pretty good but i am tapped out on credit and because I paid cash for the last property I dont have any more to buy another property. What Iwant to do is do a cash out refi but the lenders are telling me I have to wait a year because I paid cash for the property. Is there another way? Help

[Albert Bui]

Originally posted by @Ryan Mackfee:

Ok...so now I have three rentals and they cash flow pretty good but i am tapped out on credit and because I paid cash for the last property I dont have any more to buy another property. What Iwant to do is do a cash out refi but the lenders are telling me I have to wait a year because I paid cash for the property. Is there another way? Help

Problem with Delayed financing even if you intend to use it is that you will only be able to obtain the lower of 70% of market or your total acquisition cost on your final HUD at closing upon purchase. If you buy a good enough deal you'll be able to take your entire acquisition cost back and have a note on the property for this amount. This however does not factor in your funds you'll need to put into the property to rehab it so you're still in the deal with some of your own money.

The reason your lender probably said 12 months is because after 12 months you can cash out to 75% on SFR's and up to 70% on 2-4 unit non owner occupied properties if you have 1-4 financed properties like you mentioned. Once you hit 5-10 it will get hectic but with enough portfolio lenders you'll be stylin' again so I would prepare and go network with as many community, regional, and business banks as you can. I preferably like business banks because they offer cash flow focused loans based on debt coverage ratios which is easy to accomplish if you buy right.