I made an offer on a flip that is in need of minimal repairs. The contract is 63k but appraisal would be more like 90-100. It is a single family and I would like to cash out extra for repairs,holding cost etc. Credit score is @700. Also it is an REO.
I was told by a broker that the lender would use the contract price as the appraised value and the only way to cash out is to do a rehab loan which would make the rate higher. And because it is an REO the bank would probably not be willing to inflate price to get cash back.
The other option is to use money from my business and pay cash and refi right away. I would prefer not to do that if necessary.
The broker that told you about the rehab loan is probably right on with his advice. Some lenders will allow you to setup the rehab loan as a refinance instead of a purchase which would allow you to take advantage of the equity in the property immediately. You could roll in rehab costs, payments, etc… until you were ready to sell. As for the cash-out with no seasoning, that I cannot offer advice about, as I have never seen it other than if the property is paid for in cash then refinanced.
Convenitonal lenders have rehab programs but typically need 10% down.
There are a couple lenders that would use the equity as the down payment but their guidlines are too long to list.
A hard money lender could do it but then your eating up your profit.
So I am assuming you are not putting anything down.
After you purchase, you could turn around and do a refinance based upon the true value. Usually 90% is acceptable. So that would some cash back to you. Just another set of closing cost.
If you have good credit and time, a conventional rehab loan would be the least expensive.
I can put the 10% down but that uses part of my cash reserves that were meant for the repairs.
If I was to pull out 100% cash from my business and then refi right away for the appraised value, how fast could I get the money back. 2 weeks would be good but most people say no less than 30 days.
Some lenders that brokers submit files to will do a rush for a fee, usually around $300.
It’s possible to get in done shorter but everything has to be in order.
If you have 10% down then it’s very possible that you may be able to qualify for one of the conventional rehab loans. Since they are setting up an escrow account for the repairs putting down 10% may not affect your reserves.
If you have 10% down you can easily qualify for a rehab loan on your property. It would not have an effect on your reserves because other than the 10% you have in the deal, all the other rehab costs would be put in an escrow account by the lender.
As for your cash-out it may take 3-4 weeks for a broker to get the deal done, but a direct lender should be able to get it done much quicker than that. Now that is assuming you have all your ducks in a row, but you would already have an appraisal done, insurance lined up, and your title would just have to have a bring to date done.