Refinancing a Quitclaim

[Aja Yasir]

Hello.  My mom is quitclaiming a 2 flat property in Chicago over to me. There are no tenants in it right now.  My husband and I would  like to do a cash out refinance. The property is worth about $45,000. There’s no mortgage on the property. We’d like to use that money to fix up a property we have in Gary, IN and do cosmetic repairs on the property in Chicago so we can rent it out.  We’ve been running into headaches trying to get this accomplished.  My mother in law is a realtor and she’s helping us find refinance options.  1.  Mortgage brokers are telling her the property has to be worth $100,000+ before they’d refinance.  2.  Other brokers are telling her that we have to have the quitclaim property for 6 months before we can refinance.  

Does ANYONE know how we can get this deal done quickly? We need to fix both properties within a month! 

[Brent Coombs]

Originally posted by @Ray J.:

@Brent Coombs, are you able to elaborate on why they are worth only $45K in the first place? I'm sorry, but I'm still fairly new at this and don't understand what you are trying to say. I'm also investing in the same market, Gary, IN, so your insight might be helpful for both me and @Aja Yasir, and maybe others.  Thanks.

Once the market value of a property falls below a certain value, it becomes extremely difficult to get a loan against it. Usually, Lenders won't give out a mortgage below $50k, which means that any property valued at less than $70-80k will be problematic in that regard. A separate problem becomes: What type of tenants will you get to rent such cheap properties (in cheap areas)?

It's all a bit of a vicious cycle. It's cheap because the market won't pay more; the market won't pay more because they can't get a loan; because they can't get a loan, value doesn't go up. It's cheap because the market can't pay more... Good luck investing in those areas. Cash is king!