cash out refinance for paid off home C5 rating

[Account Closed]

Hello,

I purchased an investment home in cash. My plan was after I buy it, I would immediately cash out refinance and use 70% LTV toward rehabbing the house. I would then refinance it one last time after repairs are over to get the full value of the house.

As I’m doing my first refinance, the property appraised as a C5 citing an unfinished basement (it’s a crawl space turned into a creepy dungeon!), hole in the garage roof (ok I’ll give them this), chipping paint and bad floor boards (didn’t know this mattered to C5 rating!). All these will be fixed after I rehab the house of course.

So here I am with a paid off house and I can’t seem to get the money out with traditional cash out refinance. I also have the permits for the rehab!

Purchase price in 2020 - $415k

Appraised value in 2021 - $525k

The very least I need for rehab is $250k but I will take as much as possible.

Any ideas on how I can take out money to rehab the property? I was looking into a construction loan but it sounds very strict and complicated or a hard money lender.

Advice, guidance, and your experience are welcome! Please also feel free to contact me if you are a private or hard money lender and please explain your process.

Thank you!!

[Nghi Le]

@Account Closed

Try to do a conventional refinance (or a HELOC) at the low LTV with a different lender and see if you can get an appraisal waiver for it. Then the C5 condition wouldn't be a problem because they don't see the inside of it.

Otherwise, just get a hard money loan. You can either just get a large chunk of money upfront (easier on your life since you don't have to deal with draws) or with a holdback (which saves you some money since you're only charged interest when you use it). This seems like a pretty simple loan scenario and any HML should be able to do it with ease.

Since you already have a recent appraisal, the lender can use that and close on it in about a week. Rates should be in the 7's or low 8's since LTV is going to be low enough. Process is much easier than a Fannie/Freddie loan, and you can probably escape from having a hard pull done too, depending on the lender you go with.