Hi,
I’ll be buying my first rental property soon. 50K, 5K to fix up, $200 cash flow when rented on the low side($800/mos), $300-$400 if on the high side, median rents are $975. I like to work with the low numbers, just in case. I’m happy when I get upsides to my cash flow!
ARV is $121K, for whatever that means these days!! As it was last sold for $225K on Sept. 07. Ouch!
Anyhow, I’ll be paying cash, avoid the hassle of the 2 year income, verification, yadda, yadda.
Once, I have it rented, should it be easy to get a 60-70% equity loan, and then use that to buy a second property?
Or are banks not doing equity loans on rentals?
Don’t know, would appreciate any comment.
Regards,
Douglas
You wouldnt be able to use conventional refinancing for 6 months because of the seasoning restrictions.
However, you should be able to look at local banks, portfolio lenders, and commercial lenders prior to 6 months. These sources can be very hard to find so you may need to consult with someone who can teach you about debt service, cap rates, etc and refer you to lenders which can help.
Probably looking at 65-70% of the value which should hopefuly cover what you put in to it. The banks can either do cash back out or a line of credit.
InvestmentLoans:
Thanks for the info. I’m not looking at getting anything over and above what I put into it, considering how banks are. I would purchase cash, clear title, then do equity loan after it’s rented.
Why would there be a seasoning restriction on this?
While putting $50K to buy this property, including a minor rehab, I can live with getting out 60% -70% out on an equity loan to put towards a second rental property. Sort of do property number 1 with a backwards 70% loan? ie. Buy it cash and then do a 70% cash out equity loan. I don’t know if it would be any problems trying to do so.
If I can get more, great. But, then, if things turn sour next year or so, I don’t want to be overlevereged with the mortgage payments.
I’m more comfortable with a small mortgage on a rental.
Regards,
Douglas
Conventional lenders have seasoning restrictions to prevent people from stripping equity from properties. Since this is a new guideline I’m almost certain that many people took cash out of properties and now values have come down that dont even cover the mortgages. Just a bit of risk management I guess.
You’ll need to seek out commercial/portfolio loan options to get any of your cash bak without waiting 6 months.
InvestmentLoans:
Thanks, didn’t know that.
Regards,
Douglas