Any recent re-financing of apt building in Detroit?

Financing, Hard Money Lenders, Private Money
1

I need advice from those that have apt buildings (over 12 units) in Detroit.

I’m about to close on a property in Detroit in cash. I’m planning on getting a re-fi cash out loan, since the property will have about 25% equity. I was told by a mortgage broker that it will be a challenge getting a loan from Detroit – that lenders don’t want to deal with that city.

Has anyone had a recent experience with re-financing an apt building in Detroit?

What was your experience? Any pointers?

2

You’ve only got 25% equity? Many lenders won’t refi for more than 70-75% LTV, plus factoring in closing costs, how are you going to pull cash out?

3

I have a few funds for closing costs, but I was also thinking of doing a no-cash down re-fi. I know this will slightly increase my rate, but I intend to sell after 1 year and 1 day for 1031 exchange rules.

I believe I didn’t represent myself in the posting of the question. I’m purchasing the property for half of what it’s worth. What I meant to say… I intend to leave 25% equity in the property when I re-fi.

My major concern was the fact that the property is located in the notorious city of economic depression, Detroit. And I don’t know how feasible it will be to get that re-fi.

4

It will most likely be very difficult to get all of your funds back by refinancing. Even in areas not hit as hard as Detroit they are limiting LTV’s at 65% for cash-out. You will most likely have to find a local Detroit lender and inquire with them. Are you in the state of Michigan? if not as an out of state investor you will most likely not be able to get this done. The entire state of Michigan is considered a declining market which scares of most lenders.

5

Yes, I am an out of state investor.

I thought since I’m putting in all cash to purchase, as far as the lender sees it… the property is free and clear. So getting 65 to 75% of the property value shouldn’t be that difficult - even in Detroit.

Is this logic wrong?

6

Yes that logic is incorrect. The fact that you paid cash for a property is of no value to the new lender. The fact that it is in detroit where values are plummeting a 65% LTV loan today could be a 100% LTV loan in 3 months. Out of state investors are especially scrutinized because you have no connection to the community and will not be on-site to make sure the property is kept up.

7

Thanks for the feedbacks. They were very helpful. I’m currently rethinking my strategy and investment area.