Best refinance parameters

[Jeremy Clark]

Hi everyone. Here is my scenario. I purchased a SFH and have a total of $120k into the property using some personal funds and and hard money. The property appraised for $180k. I would like to refinance and pull 35-40k out to fund my next fix and flip. Are there any lenders who will do this? Or will most only lend up to a certain amount? I was going to sell the property but havent received a good offer so I'm looking for another strategy.

[Andrew Postell]

@Jeremy Clark you have some good suggestions above but I thought it might be helpful to provide a little more details to help you understand why some of these items might be better than others if you don't mind.

• Loan Amount - you may have a pretty hard time finding a lender that is willing to do a $40,000 mortgage for you.  Mortgages have all these compliance rules to them which makes it hard, and costly for lenders to do small loan amounts.  And then you'll have closing costs to pay on top.  And the closing costs on a $40,000 loan are just about the same closing costs for a $140,000 loan.  Many of those loan costs are "flat" costs.  So it makes it kind of expensive to take out smaller loans.
• Lines of Credit - Lines of Credit (LOC) are a good alternative for many investors - especially ones that flip. Lines of Credit usually have very few costs (and sometimes ZERO costs) AND you aren't paying interest unless you use it. So if it takes you 6 months to find your next property....well, you paid 0% because there was no balance on your LOC. You only pay interest when you draw from it. It's kind of like a giant credit card in a way. Now, the OTHER side of the coin to LOCs is that they do have a variable interest rate. So it's not designed to KEEP a balance on it....which again, is why it's great for people who flip. See, you can use it, fix up a home, sell that home, then pay it back, then use it again, pay it back....just like a credit card. Now you can offer cash on your deals over and over again. Also, it is likely that the lender you go through on this won't want you to have a small limit, they will want to provide you with 70% of the value of the home...or something along those lines. But again, the limit doesn't really matter to you. You don't have to draw on ALL of it. Just what you need. Usually $5,000 is the lowest they will allow you to draw.

Anyway, I hope this helps with the understanding of it all.  Feel free to ask any additional questions.  Thanks!