Refinance/purchase price question

[Bobby English]

I’m from a small town and have found a foreclosure house going to auction with a starting bid of $17k. Comps I’ve pulled are saying it should be worth around $96k. I’m expecting it to sell for around $50k in the auction.

My intention was to pull out what I’ve put into it by refinancing and then using a heloc to capitalize on the equity left in so that it cash flows with the lower mortgage of the refinance and I don’t need to pull all the cash out to keep investing in more opportunities.

I spoke with a bank today and was told that whatever I purchase the property for is now the value of the house. No matter that it was sold in 2017 for $82k and the information that the comps are revealing. He said because the house would be an investment the refinancing would be 90% of the purchase price and because the value is based on purchase price, there would be no equity for a heloc.

This doesn’t seem to match up with what I’ve read and heard on the BP podcast.

Any thoughts from the BiggerPockets world?!

Thanks!

Bobby

[Michael K Gallagher]

@Bobby English I would echo the theme of "ask a different bank"....I have not done any "non-conventional" financing as of yet, but have had several discussions with banks around town regarding some different ways to finance now that I am self employed and by far the best terms and most understanding of "the deal" has been my local Telhio credit union here in Columbus OH.  The key there was that they are going to service the loan themselves and to quote the gentlemen there "it all depend on the deal..." which was refreshing to hear.