brrRr - Looking for knowledge around the 3rd R, REFI.

[Bukka Levy]

Hey there Brainstorm,

I'm curious what can be expected, or even possible, as far as refinancing to get cash out. I keep running up against 75% max loan to value. Is this really the ceiling? I'm looking for more cash out and who does these (and what it's called if this type of loan has a specific title).

Thanks

[Nick Robinson]

@Bukka Levy

Full disclosure I have not cashed out as much as possible from a SFR. I believe that lenders want you to have at least 20-25% still in the building and honestly you do not want to take so much out of the property that you have a negative CF. In terms of you only getting 75% LTV and it not being enough to do anything that is why I moved to bigger properties. I am buying a 14-unit and renovating it. The nice thing about a 5+ unit building is that the value is based on the money it makes so you have a better idea of the value of the building. Also when you pull out cash it maybe close to the same percentage but it is a lot bigger number. For instance I will be able to pull out $500,000+ in about 2 years (6-8months reno and then I need to have it stabilized for about 12 months to get agency debt).

Once I pull the money out the property will support itself and considering I will get long term debt, 10yr term/30yr am w/ 1-3yr I/O. That allows me to CF well while the rents increase over that 1-3year period. The key is the number of units will drive up the NOI quicker than a SFR.