Cash Purchases - Questions on refinancing (Pulling out Equity)

[Lenna Groudan]

Hi, we are working on our "buy and hold" business plan and came up with a couple of questions related doing cash buys of residential properties followed by refinancing to pull equity out.

We are planning to build a portfolio of single family or small multi-family homes for rentals.   We intend to make initial purchases with cash as we assume the deals will move faster and we can probably get a slightly bigger discount on asking price if we propose an all cash deal.   However, this strategy cannot scale indefinitely!   Our questions are:

- Are the total closing costs and lender fees significantly higher o effectively to this process in two steps?   Step 1:  Buy the house for cash.  Closing costs don't include any lender related fees.   Step 2:   Refinance (70%-80% of the homes value) to get some of the cash out to purchase the next property.

- Is this refinance going to feel more like a typical residential loan closing or does it feel more like a home equity loan process?   I know this is probably fairly rudimentary for a lot of you so hopefully this is an easy one to answer.

Thanks in advance!