Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
I am buying my first rental all cash for 45k and am wondering how I can go about getting the cash back? I am running into a few problems that the banks are having with Non owner occupied properties.
The loan officers are telling me that I need to live in the rental to get a home equity or line of credit, but are telling me they don't check and you can get away with it. I don't want to do anything like that and would rather go safe and let them know it is an investment..
The other option is a cash out REFI which I know you have to wait 6 months for that.
Any one know a way they have used on an investment property to buy it cash close and then within a couple weeks to a month get 50-60% of your money back? thanks
I routinely do a cash-out refi at 65% of my purchase + rehab costs; the refi is typically up to 5 years with a balloon (amortized over 20 years) @ about 7% interest, and it can be done as soon as the day after the purchase.
This is pretty typical for small banks that do portfolio loans -- in fact, I know a couple other investors here on BP that get similar loans.
Find a small, local bank in your area that does portfolio loans...
I routinely do a cash-out refi at 65% of my purchase + rehab costs; the refi is typically up to 5 years with a balloon (amortized over 20 years) @ about 7% interest, and it can be done as soon as the day after the purchase.
This is pretty typical for small banks that do portfolio loans -- in fact, I know a couple other investors here on BP that get similar loans.
Find a small, local bank in your area that does portfolio loans...
Ok i am still concerned with a couple of things buying. In all cash. I want to put my property under an LLc and would it be harder to refi after that I have heard some trouble getting a loan. I worry about the tenants sueing me and since I own it free and clear they can come after me.
Another issue is the tax deduction on interest. The return would show I am making more money on my rentals since I have no Pi and wouldn't allow me to reap better more tax benefits.
I don't mind waiting 6 months i have other ways to get cash quick and have no bills now to worry about so that Isn't my issue now thanks
I know many owners of investment properties that have lines of credit or home eq loans. And you're right, do not lie about whether it's owner-occupied. Mortgage fraud ain't worth it.
The loan officers you're talking to can't do the loan & therefore they are suggesting craziness. It's not far-fetched at all for a lender to check if a prop is owner-occupied. 99.99% of the time, it's obvious where you live just from your paperwork in the application. They won't really have to check. The underwriter can see it right away.
As J Scott said, you have to find a small local bank that holds their loans (portfolio - kept in their portfolio). They will/can do "almost" whatever they want (that's legal) and will consider using the appraised value from day one.
Yes, using an LLC could be a problem. Depends on the bank.
Hi John,
Castle Bank in Meriden, Ct., was a 2 Branch Bank.
They were bought out, by Naugatuck Savings Bank.
They now have 16 Branches in the State of Ct.
Give them a call, and see if they keep the mortgage notes in house.
I know that Liberty Bank doesn't sell the mortgage notes.
yes, i did find that bank on the website of FDIC and the lady has told me they don't check (only for an appraisal which is drive by) I still do not want to risk that, worse case I will wait to do a cash out refi in 6 months and will probably only take out 50% of the value to invest instead of 70% just to keep good equity in the house.
I would call every single local bank in the area and speak with the residential loan officer. Explain them your situation and I am sure you will come across at least one bank that will allow you to do cash out refi without any seasoning period.
I have a local bank here that I deal with, they allow 80% LTV with no seasoning. 7 years ARM with 30 years amortization. They allow upto 3 loans for residential investment properties. The key is to finding banks that do portfolio loans.
John,
we should network sometime and get a comprehensive list of investor friendly banks. I have a guy out of milford that has no problems doing refis as well, cash out or rate/term.
Just curious, Max, what is the rate on the 7 year ARM currently, and what are the bank fees (origination points, processing, underwriting, the fees other than those paid to 3rd parties)? Does it have a 30-year maturity as well as 30-year amort? When it start to float, what is the index and margin? Is there a floor rate below which it can't go? Will they finance rehab expenses?
If they also have a 5/1 ARM and 3/1 ARM, what are the rates on those?
Hey des, yes which bank is it? I called the milford bank and they said they wouldn't touch a property in Meriden and it was out of their reach. The same was with Guilford Savings Bank as they only deal along the shoreline
Have you considered Hard Money Lenders ? Yeah the interest rate will be High but if you are looking to Flip another property with it , it could be an option.
No i am not looking to flip I am strictly sticking with this as a rental for now. I have considering flipping in the future though, but would need more education on it before I decided to consider flipping properties, another issue with paying cash is how long would i have to wait to transfer to an LLC? I know it isn't smart right away because I would have trouble with getting it REFianced I am worried about the potential to sue since i owe it free and clear though.
ok Des can you also send me your phone number I have some questions as I close tommorrow on the process of the tenant upstairs and want to get a few opinions on how to deal with him. Has been there 4 years but is paying below market rent (625) could be 675 and only has a 250$ deposit being transferred to me!!
I'm just addressing your last post. Make sure you pull good rental comps before deciding to increase the rent.
If the variance between what you can get is substantially higher than what the tenant can get by moving, then you may want to proceed. You may want to find the answer to this question: "How many qualified, long term tenant application will you receive after evicting this tenant?".
Make sure you abide by your State or local municipality laws/rules i.e. written 60 day advance notice of rent increase.
Make sure the rent increase is reasonable and fair, which may be considering you're thinking of only $50, less than 10%.
stan, he is on a month to month lease, and as of May 1st I can write a new lease with him. I am aware he paid April's rent, but I was thinking of setting up a month to month as well, and I can inform him of the increase to 650 for may which is only 25$ and keep him at that. I will then see how it goes with my bottom unit once i am done painting and see how many QUALIFIED applicants I get at 725 for that and then decide if I should raise him up another 25 or so. The issue i have is the small security deposit, and the fact that he uses the garage and the attic
John,
we should network sometime and get a comprehensive list of investor friendly banks. I have a guy out of milford that has no problems doing refis as well, cash out or rate/term.
It would actually be great to have a list of investor friendly banks... especially in this market, I've had a trouble with initial and refi's on some of my properties.
Its nearly impossible to create that list. Banks change policies and guidelines frequently. The FDIC institution directory lists 7,607 active banks. Try searching for that directory for smaller banks in your area then pick up the phone and start calling and explaining your specific situation and deals.
jon's right....my preferred local bank is nearing capacity on investment properties..that being said, every day they're lending money on new loans and old loans are being paid off, so basically it depends when you go in and talk to the bank...
sport, it may be good to talk to these local banks and ask for the commercial lender....some banks won't mind about the LLC either..just ask
Also, credit unions can be decent sources of money, but they're not on the FDIC list. Just google for listings of credit unions in your area.
I've found it is also very helpful to look at banks that are based in adjacent counties. They almost always will lend in your county as well, and if they're a satellite county to a larger urban area, they may have come through the RE crash a little better and are still doing investment property loans.
thanks for the great advice guys. I am hoping once I get both my leases in place they will see I am making a profit and not mind giving me some of the equity back. I know most want 2 year tax returns but I will just have to look harder to find a bank that won't. I am employed and have little debt to begin with, just most banks want OWNER OCCUPIED equity loans.
what you want is a refinance..forget about the value or the perceived equity...you won't get a bank to appraise on the value of the property...they'll say it's worth what you paid...show them the settlement statement that you paid cash, and ask for 60-70% of that back..
ok and I just have to find a bank that will consider me doing this right away not waiting the 6 months and that would be the smaller banks that deal with investments sounds like a plan thanks guys!
What Bryan says is what you should be looking to do; ie a cash out refi and these days you can pull out up to 70% depending on the banking institution.
Just curious, Max, what is the rate on the 7 year ARM currently, and what are the bank fees (origination points, processing, underwriting, the fees other than those paid to 3rd parties)? Does it have a 30-year maturity as well as 30-year amort? When it start to float, what is the index and margin? Is there a floor rate below which it can't go? Will they finance rehab expenses?
If they also have a 5/1 ARM and 3/1 ARM, what are the rates on those?
David,
The rate on the 7 years ARM is 5.25%. The bank fees other than those paid to 3rd parties is about $600-700. 30 years maturity AND amortization. The floor rate is 7%. No, they won't finance rehab expenses.
5/1 and 3/1 ARM rate was lower than 5.25% at the time I applied. Not sure exactly how much it is.
I talked to a few regional/local banks, and the products are so varied. Found one that would cash out refi a 30-year, but had a minimum loan amount of 100k?! One does a 5-year balloon, another only went up to 10-year, another required appraisal because they would value it at the lesser of appraisal or purchase price.
What surprised me was that not many of these banks knew what I was asking for right off the bat.