refinance after hardmoney or homestyle loan

[John G.]

hello bp, just want to get your take on the best strategy approach. A simple referenced scenario from "http://www.nuwireinvestor.com/howtos/how-to-use-br....

** beginning reference scenario //>

Let's look at an actual example from a real property in Memphis, Tennessee:

After Repair Value(ARV): $145,000

Purchase price: $84,700

Cost of improvement or rehab: $16,000

Hard money origination cost: 5% or $5,075

Transaction closing cost: $1,600

Total due at close: $107,375

In this case the short term lender loaned 70% of the ARV or $101,500

Cash due from buyer $5,875

The buyer then was able to refinance with a permanent lender at 75% of the ARV using a typical no-seasoning Fannie Mae lender. The difference of 5% covers the investors refinance cost on the investment home.

In the End

The investor ends up with a permanent loan at $107,300 with a 6% interest rate. Leaving them with a 30 year fixed payment for principle and interest of $643. In this example the home was rented for $1,195, leaving $552 in gross cash flow. After factoring in taxes, insurance, management fees, vacancy and maintenance, this particular home was still cash flows positive for $110 a month. This leaves the investor with $1,320 net cash flow annually on a $5875 investment, creating a cash on cash return of 22%.

Although the process is more involved than the traditional 20% + closing costs, the result is owning the property at 75% of the ARV and saving over $25,000 of cash which can be used to purchase more homes.

** end of reference scenario //>

my questions:

if i qualify for a homestyle loan, would it (in reference to scenario above) have been more beneficial to take the homestyle loan strategy rather than the hardmoney + refinance?

what are the advantages of using the hardmoney + refinance?

.. advantages of homestyle loan?

some variables i'm a bit confused about:

refinancing after hardmomey, if the total due at closing is $107,375 and ARV is $145k, doesnt the lender loan based on ARV, so the lender would give me (hypothetically) 145K, i then would be able to pay off the hard money lender and keep the difference for me? or would they refinance on the "total due at closing" and if so what happens to the equity difference?

thanks in advance!