Cash Out Refinance on a Conventional Loan

[Sam Morgan]

Hi All!

I am hoping to get some feedback, advice, criticism, missing pieces and anything else about an SFR I plan to purchase for $210k with an 80% LTV Conventional Loan, conduct $55k in renovations, and then cash out refi on the equity gain. The home should appraise for $270k (conservative) when complete. This is an off-market deal at the tax-appraisal price. Unfortunately, it needs $30k just in re-wiring and HVAC work... But should rent for $2,200-$2,600/month when renovated.

• a. Purchase Price: $210,000
• b. Down payment: $42,000
• c. Renovation: $55,000
• d. Total money in: $97,000 (b+c)
• e. ARV: $270,000
• f. 75% LTV Cash Out Refi: $202,500 (e*.75)
• g. Cash towards 1st loan: $168,000 (a-b)
• h. Total money in after refi: $34,500 (f-g)
• Am I doing this right?
• Am I correct that the higher the ARV, the more cash I'll ultimately have to re-purpose?
• If these numbers play out, I'm still in it for $62,500. Which is not that far from what I might put down for a turn-key property in my market anyway. Though, rents would be 1/2, as this one has a downstairs apartment. Thoughts?
• If the ARV turns out to be $300,000 haven't I just made it harder to cash flow now that I'm essentially taking out a loan on a property that's in line with all the MLS properties in my market?
• I know this is a lot, but I truly hope for and welcome any and all replies. Thanks!

[Will Fraser]

Hey @Sam Morgan, I'll 2nd AJ here, and add another item:

On line F or on an additional line I'd account for the refinance charges, say 1.5-2% of the new loan cost? If the cash-out loan's LTV is 75% then I might build this number in as .73 to make sure that my true "cash out" number accounts for what I will actually expect to see cashed-out.