BRRR - Cash out Refi Question

[Kelly Cullen]

When doing a cash out refi, do they typically give you the appraisal value or a percentage of LTV?

I have a property that I purchased and renovated on a LOC and intended to do the BRRR method. Now I am contemplating selling. If I can only get about 75% LTV for a cash out refi then it would only cover my costs and not give me any extra to use for a down payment on my next property.

I am very new to real estate investing, any insight you can provide will be much appreciated!

[Mike Conner]

Hey Kelly, I invest here in Tallahassee and just finished what was supposed to be a BRRRR but the mortgage companies have little interest in providing loans for BRRRRs (cash out refinance with the house purchased in cash) if you have no skin left in the game. The way they worded it to me is they went through the 2006-8 bust and many investors that had zero cash (getting all of your initial investment back) in the loan handed over keys. For example on my property: I'm all in at $195k cash, it would appraise for $255-$265. at 75% LTV that's 191k. They wanted me to leave an extra $20k in so 191k - 20k = 171k. B/c apparently the 50k in equity is not enough, they wanted more cash. In addition, these were all 5/1 ARMs on a 20 year amortization (ie commercial loans). Some of them also would only give a loan on the purchase + repairs amount, not the appraised ARV amount.

This is a 180 shift from the beginning of the year. For the the most investor friendly mortgages call - CampusUSA, TC Federal CU (Jaime), University Lending (Lauren Thruman) or Bank of Camilla (Mitch). But all of them were quoting me really high rates on cash out refi's 8.5-9.5% on 30 year notes and 5/1 ARMs. I personally decided to sell mine off when I would typically keep the property. There is a pretty good demand for houses under $250k but most of these first time home buyers will need some closing cost assistance. My house was on the market 5 days listed on 11/19 and now I'm under contract at $255k (over Tday break) w $8k as seller concessions for the buyers closing costs, so you should be able to sell easily considering it's in good shape in reasonable area. If you ever want to meet up I'd be happy to talk with you.