So I just completed my first rehab. I bought it for 230k and spent 120k to renovate it (including taxes, insurance etc.) I don’t owe anything on the property. It’ s going on the market for 499k in a week or two (still have to fix the pool).
The problem is that I can’t get a dime out of it. I applied for a home quity loan and was rejected for lack of long term credit and income. I make about 70k after taxes a year from a casino I own part of, but that just started to pay out cash this summer. I also took out 500k in long term capital gains this year which nobody seems to count as income.
It’s not the end of the world if I don’t get an equity loan out of this house, but it’s just frsutrating that I can’t seem to finance my properties. After getting rejected for a loan on another house I had to take out a 200k dollar loan from my mother just to buy my second property.
have all the good lenders just given up doing rehab loans at a reasonable percentage? I refuse to pay 4 closing points and 13% a year. This is all very frustating as I’m sure you can imagine. Does anyone have any creative ideas for how to get just like 200k out of my 500k dollar house?
Unless you have a 2yr employment or self employment history your probably not gonna get a conventional loan anywhere. I would suggest just selling the house or doing a 1031 exchange. And of course work on securing a steady 2yrs of consistent income and solid credit history. Maybe start an llc or corp and after your license has seasoned for 2yrs you can apply for loans with your work title as “RE Developer”.
I’m not renting the property out now, but I’ll be moving into it while it’s for sale to save what i’m paying now in rent.
I’ve had the LLC set up for about 8 months now, but the only pay i’ve been taking out of it has been minimal (less than 10,000 for some personal expenses).
Tomorrow I’ll be talking to my banker again about my options, but it just doesnt sound all that promising. I applied for a home equity loan recently and was rejected for lack of credit history and lack of income.
If only croooked bankers were still giving out loans to people with no income or credit history…in some cases with young RE investors (like me) it really would have been advantageous.
Refinancing after rehabbing is not a viable exit strategy for your current situation, especially due to tightening in investment property guidelines. Building your personal/business credit and 2 yr employment history will be imperative going forward–these factors are just as important as finding the right property.
Nevertheless, speak with as many people as you can about pulling out cash—someone should be able to offer you favorable terms.
Another problem you are going to run into is that once you have the property listed no bank is going to give you a cash-out loan. If you could find someone to loan you at 13% with 4 points I think you should jump at it. In today’s mortgage market you should take what you can get because just from what you have posted I think it will be very difficult for you to get 200K out of this house. Is the 70K salary from the casino? Or are you just projecting 70K based on current withdrawls from the company? What kind of reserves do you have?
This one thing you could do, and that is you hold the paper on the property. By doing so you can take part of that note and sell it for the funds you need.
Example: $499,000 sale, 30 year term fixed, 8% (or what market is at), no fancy clauses, just a straight note. Each month you would get $3661.49 or over the life time of the note $1,318,134.68. If you held the note for 6 -12 months and then sold only what you needed, say 180 months worth, $659,068.20, even after discount you would have your original investment back.
Onec the 180 months are done, the payment revert back to you and you have 180 months less what ever seasoning you had and can then sell that or keep the income.
This way you can control some of your cost of dealing with the banks, who at this time are gun shy of big loans.