Cash-Out Refi on Low-Income Multi-Family Houses in Cleveland Ohio

[Jacob Silvermetz]

Last month, I purchased a portfolio of 10 low-income houses with 21 rental units in Cleveland Ohio, in one blanket purchase agreement for $250,000. After renovations of between $50,000-$60,000 the ARV is conservatively estimated at $360,000. the purchase and ongoing renovations were financed using private loans, unsecured bank loans, and some personal cash, so the houses were purchased without any liens/mortgages.

I plan to perform a cash-out refinance on all properties within 14 months of owning them, using either a portfolio lender or multiple residential loans. I have seen MB Finance listed as a potential lender for as low as $25,000 at 75% LTV, which could work for my needs, and I wonder how their terms look.

Can you share previous experiences with lenders that support cash-out refinance loans around $25,000-$30,000 in Cleveland Ohio?

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For reference, the following 10 addresses are near to the 10 purchased properties. Identifying a conservative and reasonable ARV has been tricky, so perspectives are welcomed on the $360,000:

4500 Bush Ave, Clark Fulton, 44109

3800 E 143 St, Mt. Pleasant, 44128

10300 Shale Ave , Woodland Hills, 44104

16100 Arcade Ave , North Collinwood, 44110

14000 Hale Ave, North Collinwood, 44110

800 Wayside, South Collinwood, 44110

3200 W 58 St, Stockyards, 44102

2000 W 83 St, Detroit Shoreway, 44102

1200 E 60 St, St. Claire Superior, 44103

10500 Mt Auburn Ave, Woodland Hills, 44104

Thank you very much.

[James Wise]

Originally posted by @Jacob Silvermetz:

@James Wise, you misunderstood my message. Estimated ARV is $360,000 on the portfolio after reno and full occupancy. The cost of renovation before refi is between 50-60k.

Would want a cash-out refinance for $250,000 on portfolio, or as low as $25,000 per house.

Attainable?

 Prolly not. Lowest I've seen a bank write mortgages for is either $20,000-$25,000 per house & that is from MB Financial but that's at 75% of value. So if you've got a house valued at $25,000 the loan would be too low as it'd only be $18,750. Another issue that you've got is when it's on a blanket or portfolio basis they typically want the value of the homes to be much higher than $25,000. Some of your values aren't even that high.

Take 3800 E 143rd St, Mt. Pleasant, 44128 for example. It's really a total crap shoot over there in that neighborhood. Properties don't trade very often as nobody wants to buy over there as values regularly go close to zero. If this property is not renovated it's got a value between $500 and like $5,000. If you got a tenant in there you can probably get anywhere between $10,000-$20,000 for it. 

Doing a recent comp search for you which only popped up 3 sales in the last 365 days over a quarter mile radius (this is way lower than it should be for an urban area) take a look at this house. 3857 E 143rd. Sold for only $20,000 & it is a considerably newer & nicer home than what you're working with.

If we take 1200 E 60 St, St. Clair Superior, 44103 neighborhood it's worse. To actually pull up a reasonable amount of comps to show you I had to go back 5 years & only pulled up 6 single family comps within a quarter mile radius of that house. That's right only 6 homes sold in the last 1,825 days over there. Pretty hard to place values on crap like that. 

Here are the multi family properties using the same quarter mile 5 year specs.

Given the above i'd say your best shot would be to try somebody like Lima One Capital but I don't see a high chance of success given the data. Loan is just way too risky & low value for a bank. If you don't pay it off what are they going to be able to foreclose on? The cost to foreclose & then sell some of these homes would be more than what the houses are worth.