Cashout Refinance

[Nick Zocher]

Hi All,

I'd like to get some clarity on the Cashout Refinance strategy.

I recently listened to a Podcast (Show # Late 50's or early 60's) where @Brandon Turner mentioned that his strategy to buy several properties fast was to buy properties at a discount, rent and let them ride for a few months, and then have property re-appraised at a much higher price, refinance and recapture his capital to use on the next property.

I'm really interested in this strategy, so I began to do some research. A lot of the articles I'm reading mention that this is the "Delayed Financing Program" and only applies to all-cash buyers.

Other articles mention that a major key in order to be approved for the refinance is a large amount of equity in the home.

I don't believe Brandon did all-cash buys, or had great amounts of equity in these homes after only a few months.

Can anyone clarify how to properly use this strategy?

Many thanks!

Nick

[Ned Carey]

I can't speak for Brandon but here are some thoughts.

It depends on the lender. Some will refinance out very quickly some want 1 or even 2 years of stabilized cash flow. Some may do 80% loan to value some may only do 70% loan to value. Some may only require a short period to refinance but will base it on the purchase price. Some may base it on an appraisal that is higher than the purchase price but may require a longer wait to do that. Lender vary their terms so you need to talk to a variety of them. generally the national lenders will be much less flexible than smaller local or regional banks.

As investor we try to get great deals that are below market so there is room to refinance. Also you can build sweat equity. Buy a fixer upper for $40K put $40K in repairs but now it  might appraise at $100-120K.