Looking to refinance a rental property

[Sean Tift]

My partner and I own an investment property in Indianapolis(SFH 4bed 2 bath, 1508 sqr feet). We acquired the property prior to the pandemic, in 2019, and it has appreciated quite a bit since. The original purchase price was $88k. We took out a HELOC against the property in mid 2021 and currently owe a total of $97,500.

Closest comp in that area is around $150k. 

We are looking to refinance the property to lock in a good rate before they increase and to pay off the HELOC. Ideally we would like to do a cash out refinance in order to take out some money for other repairs on our list. Does anybody have any recommendation of lenders who are willing to do a cash out refi on an investment property?

What other considerations should we keep in mind as far as rental income from the property, cash reserves, etc... 

thank you. 

[Riaz Gillani]

@Sean Tift I'm a private lender with expertise in BRRRR.

You may want to go DSCR / private. Here you can get up to 75% of the Appraisal Value back to pay off the HELOC and turn some equity into cash.

Qualifications are credit score and DSCR (which is essentially a measurement of cash flows). So, to answer your questions, you'll want to make sure the property is occupied #1. Then consider the monthly taxes, insurance, and an estimated P&I payment. When taken against the rental income, if you're in the green, you ought to be good to go.

DSCR lenders also offer 30 Yr Fixed Rate loans. No balloon or term renewal. Fully Fixed Fully Amortized. Generally embedded with some variation of a PPP, so consider your time horizon and exit strategy.

Not much else besides the primary benefit of private / DSCR is that it's "LITE" doc. So, no tax returns or income / employment verification. Like I mentioned, credit + DSCR. Liquidity shown via bank statements. The mortgage generally doesn't show on credit reports either. Though you'll personally guarantee the loan, the transacting party can be your entity.

Hope that helps.