Hard money or All cash

[AJ Biz]

In the process of buying an REO 4 plex. Owner is still in one of the units. My conventional loan cannot fund because the owner (holdover tenant now) or foreclosing bank will not cooperate in getting a wall heater installed in that fourth unit.

My options - close it all cash. Or hard money loan.

Once we close with either options, I could do a refi.

Issues: If I go all cash, can i get a cash out refi (pulling out 75% of equity)
Or, if i go HML, and for whatever reason i cannot refi, i would be loosing money on the investment (carrying cost too high) and then at the end of 6-12 months, pay the HML lender out (all cash).

I would go with all cash, if cash out refi on conventional non owner occupied 4 unit property was "doable" in this day and age.

Thoughts?

[Bryan Hancock]

Did you change your name somehow? I am confused...Are you the same person that posted the original post?

Yeah...I meant do you have access to Fannie/Freddie financing still. It appears you do so that is good news for your stabilized loan constant.

Please do me a favor and avoid Bank of America for the rest of your investing career. They are the absolutely worst bank to deal with and I hate them with a white-hot passion!

Amerisave is a GREAT place to go for your lending needs. They can likely find you some obscure lender that you never would have found absent a broker.

The numbers looks pretty good if they are correct. Would you mind posting the itemized numbers for the last year of operations so that we can see if you are missing anything based on a cursory analysis? What are the gross rents roughly?

It is a judgment call as to which option is better and it really depends on what other deal flow you have or can expect. If this deal takes you out of the running for subsequent projects because you paid all cash your opportunity cost is pretty high. What is your required ROE for projects?

I personally think that 4-plexes are generally bad investments. They have all of the problems of MFDs and lack a lot of the upside of SFRs. The resi financing invites a lot of competition for bids too whereas bigger units are commercial financing which limits your competition some.