How to Cash Out Refinance / Little income / House Hack

[Brendan Savage]

My brother and I co-own a 4 bedroom home that we purchased fully in cash in September 2020 for $167,000. It is now worth about $200,000 conservatively. We rent out two of the rooms cheaply to friends, which collects $725 a month.

I am looking to sell and want to invest in multi family, but my brother wants to stay put. I have always wanted to invest more, but I have kind of been stopped from pursuing potential leads, as my brother does not have much of a work history in the last two years, while I work full time. His work history has hampered any ability to pull money out of the house to get a loan and pursue other investments.

We had come to an agreement that he would be willing to buy me out of my half of the house for $88,500. He would need to do a cash out refinance to do this, and I could take myself off the deed. He would rent out the third bedroom which would allow him to earn $1075 a month (total for three bedrooms) to cover expenses.

Are there lenders out there that would be willing to lend to him, and allow him to do a cash-out refinance? He has about $22,000 in cash reserves, and would look to use the rental income to help pay. He is currently in EMT school after passing a civil service exam to become a professional firefighter, so he is at least on a career path now.

I have become frustrated by the situation, I'm not sure if there are lenders that would lend to him. I just want to get out at this point. I spoke to one DSCR lender who wouldn't do it because it would be his primary address.