What would you do with $150-175K cash from refi?

Question

So I’m finally taking the equity out of a duplex I purchased back in 2015. I will have about 150-170K cash after doing a cash out refi. I was going to play it safe and stay local in my Tampa Bay market, which means the cash would be a down payment for a multi family property in my area since everything is so expensive (also rents aren’t amazing, 1% rule doesn’t apply in Tampa’s market).

I am now tempted to try an out of state market where I can use that cash to buy a multi-family property outright and then cash out refi to buy another multi-family. If I go this route and can only fly out once, when is the best time to go - to initially view properties, or to see the final property with the inspector?

Appreciate your thoughts!

Stephanie

Jeff Shumway · Answer

Hey Stephanie,

I'm not sure if you plan to force any appreciation on the property but keep in mind that if you purchase a home cash and do a cash out refinance you may be limited by the purchase price of the property on the cash out refinance. This is called delayed financing. For a conventional loan, the max loan amount is 80% of the purchase price. So if you do any repairs on the property, you likely will not get a loan amount that reflects the full ARV. You would have to wait 6 months to to get a loan based on the full ARV. There are programs that will lend around 70-75% of the purchase price + any documented repairs but it can be a bit of a gamble if the purchase price + documented repairs will come back at the ARV.

Stephanie Wells · Answer

@Mike D'Arrigo…Super helpful thank you.

Mike D'Arrigo · Answer

It wouldn't make sense to go see the property before it's renovated but not after. If you're only going to see it once, go when everything is complete and while the inspector is there. This will give you a chance to get an explanation of the items that they inspector notes on the report.

Stephanie Wells · Answer

@Jeff Shumway Hoping to not have to do too much to the property I find, especially if I go out of state. Don't think I'm mentally ready for a full on rehab yet! Thanks for the insights though.

Stephanie Wells · Answer

@Raymond J. Rodrigues Definitely noticing that rent increase starting up, maybe by December rents will be closer to the 1% rule if home prices simmer down even more.

Raymond J. Rodrigues · Answer

@Stephanie Wells, a recent article released stated that rents were to increase almost 20% in the Tampa Bay Area this year!

What would you do with $150-175K cash from refi?

What would you do with $150-175K cash from refi?

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