Contractor · Vineland, NJ · Member since 2019 · 16 posts · 1 vote
If I we’re to attain a 203k loan for my personal residence. Buy something distressed, use the loan money to purchase and rehab.
Could I refinance on that loan after 6 months to a year and pulls out the equity after getting it re appraised. So, I can then use that money to re invest in another property?
I know many investors use that strategy. I just didn’t know if there’s rules when using a 203k that prohibits doing this.
@Mark Lynch I think the practical answer here is that this would not be possible. A 203(K) loan is designed to take the purchase price + rehab into the loan....well, minus your downpayment at least. So to keep the math simple....if the property costs $150,000, rehab was $50,000, then your downpayment would be 3.5% of $200,000...meaning your new loan amount would be $193,000. So in order to do a CASH OUT loan in 6 months...your home would have to appraise for $255,000 for you to get about $10k in cash. The BRRRR method is a strategy designed for investment properties....mainly because your down payment is significantly higher on investment properties. On your primary home, your benefit is a lower rate...and you get to put down less money. So you won't get to take cash out....unless you found the deal of the century or something....but the other 2 aspects make it beneficial. I hope all of that makes sense. Feel free to ask anything else if you need to. Thanks!