Cash out refi short term rental

[Sylvester Szmejda]

Hey guys,

I am new to the forum and I am currently a new Short Term Rental investor as well. I have just started my 1st STR and it's going great, even better than I expected. I'm looking to do a cash out refi because I own the house outright, I built a ton of equity in it, and I want to use it to buy several more properties where I can replicate what I'm doing with this current STR. I have about $10k liquidity at the moment and no income to show on paper other than the STR income which is already sitting at about $40k between July-August but I just started it about a month ago so I don't have a track record of at least 6 months to show.

I found a lender named lendsimpli that will do a cash out refi at 65% and 5.25% fixed 30 years without a track record and income verification.

Has anyone worked with this lender before? Do you think these terms are fair? 

I'm considering this over waiting 6 or 12 month because I want to have another STR ready for next summer and also purchasing at least a duplex so I can house hack it while I am building my STR portfolio.

Any suggestions are greatly appreciated! Thank you!

[Xander Weidenbaum]

Hi Sylvester - congrats on your successful STR! A few things when shopping cash-out refi's:

1. Do you need the income from the property to qualify for the refinance? I.e. Do you have a sufficient debt-to-income ratio w your 'day job' to qualify to take on debt from the property? If you have a good debt to income ratio w/o the income from the rental...

2. Most lenders will lend at 75%-80% LTV on a non-owner-occupant single family residence for fixed rate cash-out around 4.00%(+/-) over 30 years; if you're a strong borrower, I find these loans are fairly easy to get. Once you get into multiple units, that LTV will decrease (65% on a 3-unit for example). The Pocono Mountains market has appreciated 45% in the past year so if you own the home outright and it's nice, you are likely in a good equity position to qualify on the EQUITY in the property alone and receive a nice chunk of change without the 'rental income' playing a factor in the valuation of your asset.

3. In my experience, appraisers are in high demand in our area and the 'best' ones work with the local banks. Some of the larger institutions - national banks like Chase/Wells, online lenders etc. - don't have access to the best appraisers because they don't join their pool. Getting a good appraiser and an accurate (that reflects current hot market conditions and not 'comps' for a year ago in dissimilar geographic areas) is key here. You want the maximum appraised value for your property. For this reason, I would suggest a local lender. 

4. Be aware of fees. Due to a change in FNMA guidelines, many 'direct lenders' have pricing overlays on investor loans currently and this has driven up the rates, fees, or both. I've done a cash-out refi this year and multiple investor acquisition loans past 12 months. The best 'deals' I've found (by far) have been w local lenders. 

5. Highly recommend Eliese Grella at Fidelity Bank out of the Lehigh Valley. I'm afraid my post will get tagged for sharing her contact (I have ZERO affiliation with her; I'm a real estate agent). I've worked w nearly every top lender in a 30 mile radius over the years and she's my current favorite in terms of pricing, ability to hold loans 'in house' if they're non-traditional and having a great appraisal pool. If I can drop contact, it's (484) 695-8889. Highly recommend - she's the truth. 

If you need anything else, feel free to DM me directly. In the same market as you, I've personally completed cash out refi's, resi acquisition loans, multiple property commercial umbrella loans, single commercial loans and have assisted tons of clients w the same. I'm into helping and seeing people succeed. Good luck.