Refinancing Under Value

[Alex Simon]

Question. I have a four-plex that I pretty much stole, and that I currently own in cash. I paid $200,000 for the asset, invested about $50,000 on the rehab, and was able to take the rents from $2,000/Month to $3,600/month. I want to use the BRRRR strategy on it and think it will appraise for between $350,000 and $400,000, if not much more. My question is, what are your opinions on refinancing for less than the appraised value. Should I max out what they will lend me so I can invest as much as possible in the next multi-family asset, or should I be conservative and just take out what is needed for the initial amount of capital that is required for the next deal. Thought?

[Matthew Drouin]

@Alex Simon I would cash out as much as possible.  But that's me.  I think the money is better sitting in your pocket than locked up in equity which has no value in use to you.  With interest rates where they are, why not?

With regard to how much the bank will allow you to cash out, that's another story. Even if the property is worth $800,000, the bank will only allow you to cash out in accordance to their maximum LTV and what their minimum Debt Coverage Ratio (DCR) is. The banks I deal with have a minimum DCR of 1.2.

Sounds like a great deal, great work!

Just a suggestion, you should put a profile pic up on your BP profile, it helps build your credibility.