How to take cash out of investment properties with little history?

Question

Hi everyone,

I am a real estate investor located in Las Vegas. Have been following the forum for awhile and am very amazed with the amount of advice and tips provided here. Keep up the good work!

I would love to hear from you guys about the situation I'm currently having:
My family and I have transferred money from my family's country (I'm a us citizen and my family permanent resident) to purchase residential properties in Vegas all cash. However, now it had been 6+ months since we started and we would like to take the money out to purchase more properties. But neither of us could report a very high income. Nevertheless we have 6 properties (1 reside, 3 rentals (9%, 10%, 18% noi), 1 on market, 1 under rehab) we would like to do a cash out refin on. What do you recommend us to do?
Do you think going to a loan portfolio lender might help? Or do I have to go through private lenders until we build an income amount necessary for conventional? The only thing is that we think the market would only be this low for another 2 to 3 years so we would like to maximize the number of properties we could hold so to build a history might take time. I wonder if any of you guys go through the same issues and what you did to get around the financing roadblocks.

Thanks and I appreciate all your help!

Kevin Amolsch · Answer

Banks can do cash out refinances just like Fannie and Freddie. With no title seasoning you are going to get a percent of your costs. It will most likely be 60% to 70% of your costs. If you are trying to appraised value to get all of your money back you will need to season it, even with small banks. The FDIC has really come down on banks and this is one of the areas the are trying to be careful with. I am not sure about credit unions since the FDIC has no control over them. With all that said if might not make since to pay cash. If you need to have 30% of your own money in the deal anyway you might as well use the bank to finance the purchase. It is a less risky appearing loan so it is easier to get and normally will have a better rate. Cash out refinances are risky loans so they are hard to get and carry more fees and a higher rate. Another strategy which has been mentioned is to use hard money or private money to buy the property and than refinance that loan. This way it is a rate and term refinance and not a cash out refinance so it is much easier to get in without tying up you own cash.

Lisa DuFaux · Answer

I have found my local real estate investment club to be a good source for finding private lenders. At one event, the speaker found out that an attendee was a lender and had her stand up and give her contact information. I've spoken with her and will be doing a deal soon. I have several sources of money that have come from my REIA contacts.

Andy Chu · Answer

Thanks for the tip. I know we talked about it at lunch and was curious how that progressed.

Leon Y. · Answer

Thanks guys for all the info. I will start looking into portfolio lenders for the cash outs. Right now I got into touch with Bank Manhattan and I think it might work out. I am not sure haven't closed yet but I may be able to get 75% LTV out with mid 4%. Fingers crossed. They said they'd probably refi 4 and loan another 6. Not too bad at all.

Bill Gulley · Answer

Say you have a property held free and clear. You can go to a portfolio lender, they can make you a purchase money loan at 100% of the purchase price by applying an amount that would be say a 25% down payment on your existing property and 75% on the purchased property. This is done with a blanket mortgage with an agreed payoff to release the old property taken as additional collateral. You can also do it with a proprty that has a mortgage at a lower LTV if there is enough room. Say you have 30K against a 100K property, 50% of the value is 50K less the 30K loan should give you 20K worth of collateral to assign...(I used 50% because the collateral is in a second position). You might also look at an open credit line doing this with a future advance note with a blanket mortgage arrangement, your advances would only be made in the acquisition of a new property as a collateral assignment with the applicable release payoff amounts.

Richard Chang · Answer

Hi Leon, I also would like to see how you're doing with the Refi's. Terms / issues etc. Thanks, LA Guy :)

Leon Y. · Answer

Thanks I will start talking to local banks and see what they can do. I could also look into private capital but have no idea where to start, any suggestions Aaron?

Nathan Emmert · Answer

This is my 1st and it hasn't closed yet... it's 5.5% fixed for 10 years with 30 year amortization. I have a short sale I'm waiting to finish aging 2 years (June) so I've only been dealing with portfolio lenders on both my properties (5.75% fixed for 5 years, 25 year amort on my other property). I'll be in no hurry to refi this one I'm doing a cash out now... in June I hope to be able to do a cash out on the 1st as I bought about $14k worth of equity per my appraisal.

Rusty Thompson · Answer

Nathan Emmert Are all your cash out refi's coming from a local bank? What kind of terms are you dealing getting?

Aaron Norris · Answer

I agree with Nathan. Try local banks. You never know what they might have available. Hard money lenders might be another source depending on those in Vegas. I don't know any lenders in that area unfortunately. Other than that, you already have a track record. Perhaps it's time for you to learn to start raising private capital. That in itself can become a huge job but it might be worth your while.