How to get cash out of a property you bought 3 months ago for cash.

Question

I have a condo I recently acquired that I own outright. I am wanting to pull cash out of it. My issue I am running into is I recently switched into real estate full time so I do not have a w2. My credit is good/excellent. I am wanting to just pull 100k out and it should appraise for 140-155k. Part of the issue I am experience is a DSCR company I spoke to will only give what I acquired the property for plus the rehab cast. I acquired the property in a unique via trade of a different property I owned.

Does anyone have a solution?

Patrick Roberts · Answer

DSCR products are not universally the same. Different investors back different products and have varying overlays. Talk to a few different lenders. Someone will likely not have an overlay like what you're referring to, but min loan size may be an issue. Most DSCRs will be at/below 75% LTV, and very few will go below $100k loan size. Other variables will be income coverage, your experience and FICO, the market, and the property type.

Katie Smith · Answer

Hi Jeremy! I may be able to help you out on this. I can do cash out refinances after 3 months seasoning. I'm going to dm you for more info!

Brittany Minocchi · Answer

They're talking about delayed financing, which means the length of time you've owned the property doesn't meet their seasoning requirement. Not all DSCR lenders are the same - max LTV and seasoning requirements will vary. There are lenders that max out at 70% on a cash out, there are lenders that will go up to 80%. Many want 6 months of seasoning, some will allow 3 months or NO seasoning if recent rehab was completed.

Stacy Raskin · Answer

There are lenders that will use the new appraised value after 3 months. I assume the property is in Arkansas? You will have a lot more lending options if the loan amount is $100K and above.

Inherited properties can also have their own set of guidelines depending on the lenders. DSCR lenders make their own guidelines that can be similar to conventional loan guidelines but are often different as the DSCR lenders generally sell their loans after closing to replenish their cash to investors who have different guidelines depending on the investor pool.

Some DSCR lenders will go down to a $75K value and a $55K loan amount. It's the same work to do a $55K loan as a $500K loan so the fees will be higher due to the loan amount but will still be much lower than what a lender or broker gets paid on a higher loan amount.

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. Here's a bit more in detail about how rates are calculated for DSCR loans:1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs. I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Happy to discuss further.

Ko Kashiwagi · Answer

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Katherine Blazer · Answer

Sounds like they are trying to structure a delayed financing loan. You have a few options for cash-out refinance and from the information you provided it should work. I know of one fund that has no seasoning required, but they normally like appraisals to confirm value. You have a few more options because you have owned it for 3 months, as long as the DSCR works.

Jonathan Taylor · Answer

@Jeremy Porter I have a lender that allows cash out at 90 day seasoning based on full appraised value. I Dm'd you as this sounds like you would benefit from it.

Calvin Ozanick · Answer

There should be lenders out there who are willing to put a mortgage on it. Otherwise, assuming you own it outright, you should be able to get a short term hard money loan for the amount needed anchoring the loan with the property!

Erik Estrada · Answer

Hey Jeremy,

You could refinance based on the new appraised value (not the purchase price) as long as the property has been seasoned for 90 days.

How to get cash out of a property you bought 3 months ago for cash.

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