Cash-Out Refinance Question

[Wilson Manigat]

Hi there!

So, I'm not new to investing or the BRRRR strategy but I'm kind of stumped with this situation I'm dealing with and I'm hoping those with previous experience can assist me. I have a property that I purchased in Houston, TX and prior to purchase I ran all of the numbers (almost to the point of analysis paralysis). At some point you have to just jump and take a risk, right? However, that is neither here nor there. I got to the end of my rehab process and I'm running into a few issues:

-Due to the rates of the hard money loan (11%), the fees are way too high to try to move someone in the home and have them come close to those fees in rent... even if I have to eat some of the costs in order to have the property season for a refinance.

-Even if I did go that route the rental avg in the area is around 2300 and I'm paying around 3700. So I wouldn't be able to find someone to pay (or come close to) that in a timely fashion because its waaaaaaay above what the area warrants even though its a fully renovated property.

I decided perhaps I could shoot for a DSCR loan to cash out refi and then rent from there but due to the rent avg in the area being so low versus what the DSCR monthly rate would be, I wouldn't qualify for it. I was told I could get rate and terms (Conventional) which would be just enough to cover the hard money and nothing else. Obviously that may sound ideal, but I went over on the rehab because we ran into a ton of issues we didn't anticipate. So me needing the money out of this is more than just for the sake of making a major profit, but it's honestly to recoup a bit of what I lost and to use whatever I can to jump into another property.

With that being said, and hopefully it wasn't too long winded or confusing... what can I do in this situation? I know selling seems to be the option here but I really wanted to hold this property. Yet, I do know that rule one in real estate investing is to not get emotionally attached to anything. Any advice would be greatly appreciated!

[Steven Goldman]

So Marco provided Wilson with the solution to problem. Sell the property. Wilson's experience is worth dissecting as a post mortem as a learning experience for the rest of us. If Wilson is from West Palm Beach Florida my first question is, what made him think managing a out of state rehab.  without prior experience was a good business plan? For you newbies, it is hard enough to find the property, borrow the money, execute the construction. Than find a tenant without adding the element of it being out of your footprint. Out of State investing is for experienced investors and it is best to start with a turn key property and get the lay of the land before you tackle a out of state construction project.

All of the money made in a real estate transaction results for the initial purchase. If you pay too much, or underestimate the rehab. or fail to control the contractor, you will get a terrible result.