? on Refi to Buy

Hey all, here in NWOhio there are plenty of good deals. I am trying to get my foot in the RE door. I purchased my 1 st personal residence 3 yrs ago( now 30,000 equity )Last summer I then purchased a rental property through sheriff sale@ 26,000 appraised @ 63,000. Obviously I have decent equity, but very little cash to work with, I guess I am asking what is the best way to get into my next property. I have been kicking the idea around about refinancing my investment property to cash out 10,000 for down payment/repairs/holding on my next investment, but I am running into high costs involved( i.e. 4500), seems steep to me, but I really dont show very much income, and my credit score is mid 6’s I think.----Is that the problem or they tryin to stick it to me-SuggestionS PleasE! :-\

Cost are almost always dependent upon what the interest rate is. Harrd to make a comparison of one without the other. You see, not only does a mortgage company make $ off closing, but also from the bank that they signed you up with. On the lower loan amounts the mortgage company won’t be making much from the lender for the rate so they’ll charge higher costs. See my next post on the 100 low loan amount thread.

Is your investment property in a negative cash flow. You could refinance with a very low ARM. I love the 1.95 and get as much out as you can
so you don’t have to go back and get more later. Put aside some of the money you get for emergencies, etc.

if you can get a low ARM then you don’t have to refinance every two years, you can ride the wave for the full 5 and have money to reinvest.

Just my .02

The best move would really depend on your long and short term investing strategy. A good broker will be able to give you the right advice.

However, you should note that you can get very good terms on investment properties with reasonable closing costs if you keep you properties below 65% loan-to-value ratio. This is lender-dependent, so depending on the lender, you may even be able to get the best pricing and terms up to 70% LTV. If you can cash out on one property to put 35% down on the other, it may make sense to do the refi.

Also, what kind of mortgage are you in now on the sherrif’s sale property? If it’s an excellent mortgage given current market conditions, you would probably be best served to keep it, and borrow maximum LTV on the new one you’re buying. With a fico in the mid-600’s, you might only be able to 95% financing, but there are 100% lenders out there for investment properties. Finance 70% or 75% on the 1st mortgage, and take out the rest on the 2nd- you will get good terms then on the 1st, will avoid mortgage insurance, and can always pay off the 2nd with a cash out refinance down the road.

OK, now I’m rambling…

Your best bet would be “no closing cost” HELOCS on your personal residence as well as you investment property. After the lines are in place find a new project and obtain 100% financing…use lines for rehab and holding costs.

^^Patrick beat me to it. I agree 100% with him. Get a HELOC on your owner occ. It will have slim to no costs and you will get access to 30k even though you only need 10k. You will only pay interest on what you owe. Its like a bank account…take money out when you need it.

Based on what i read so far i would say the best thing to do is to get 100% financing on the purchase. I know of banks who will do 100% on investment properties.
Remember if you take out HELOCS you also need to cover the payment on those loans to have any sort of positive cash flow.
I would stay away from ARM’s if possible. Right now the rates on a 30yr fixed are the same and in some cases lower than the ARM rates. You can simply do an 80/20 combo loan on an investment property to get 100% financing and avoid paying PMI or you can pay a slightly higer rate to get 1 loan to cover the whole purchase.

To all, Thanks so much for your input. I am going to try to explain a little better my situation to answer some concerns I am having. O.K first of all, I am a bartender-and obviously I do not report nearly what I make, therefore on the investment property bought last year I actually used my father as co-signer because I technically don’t “cash flow” my personal debt, ie, morg,car,bills,etc let alone confidence of a lender to support “rookie investments” --although I am patient and smart about properties(financing them is when I begin to feel a little stupid!). Anyway, I anticipated selling the property in about a year-- therefore just concerned w/ getting a 1yr ARM @ 8%–now it is @ 10% I still plan to sell the property an a year or so, so right now I am looking at a refinance 7% 7yr ARM, get my father off the loan(so that he will co-sign on my next property) w/ 10,000 cash out costing me in the neighborhood of $4000 to do so.
My next property is a currently vacant duplex that I would like to keep in my portfolio–All brick–Metal roof–sound shape–riverfront-((NO FLOOD INS.))-I think I can get at about 60000–total rent @ 800/mo.–which is what I would use my cash out for.
I am starting to ramble, but the HELOC you guys are stressing sounds good but I dont know much about lines of credit

Thanx so much Ed

When I talk ARM’s I am always referring to the 1.95 2.95 Power Loans for income properties, etc. These loans always require a higher credit score but for cash flow they cannot be beat when used responsibly can be a huge boost to cash flow on income and personal property.

If you don’t understand HELOCS then now is the time to find out about them. Call your lender and discuss the options.

100% Financing. Yes lenders like to see some money down. If you have equity, I am sure they will do it if it makes financial sense.

Most rehab lender will do 65 to 80 ARV (After Repair Value)

Here is the calculation:

Offer= (ARV x 75%) - (Repairs + Holding + Closing cost)
Note: if you want low closing or no closing cost will require higher rate.

440,000(ARV) X 75%= 340,000 .

Total cost 40,000

340,000 - 40,000 = 300,000 Offer

Some lender max at 80% due to borrower cash. If you had gotten a higher % of ARV, you would not have to put the cash. That is leverage. Keep your money in reserve. I would keep just as emergency to cover my ass if the property will not move. Pad the repair a little. You pull the wall; suddenly you have water damage behind the wall.

440,000 -370,000 = $ 70,000 profit- Ok

  1. Purchase property .Take loan out to do remodel. Harder to do some lender require seasoning of title.

2.) Rehab loan

3.) Purchase option. Locate your buyer first. Do this before looking for property to flip.

Here is a post I post in a real estate forum:

Sorry for any typo Keith:
Sorry, for the late reply. See how I sold you guys. I throw a value out there and increase that value by saying for free. Same principle. Here is how you find tenant buyers.

Yes magnetic car sticker will work. a few leads.

1-800 -homes- make the numbers so stupid a monkey could remember.

KISS- Keep it stupid simple. Yes on you magnetic sign on the car.

A website that says How to buy your dream home as little as 3%-5% down even with bad credit. Call to find what private investors won’t tell you. Limited offer! You have to have to have time value to make people act. Like a child. You give him one small taste of candy one piece at time.

Place small ads like this on the internet in forums or classified ads. With phone numbers.

Put flyer display with business card in laundry mat.
That says the same thing but you also add more value… save 6 % on your next house. Call today for more info. 6% offers expires soon must act now… keep change the date for you next set.

Think like a renter… where they hanging out at do. Coffee shop etc… Get the idea. Always be selling and closing.

What newspaper they read. Home buying magazine and news papers, and home publication magazine for renters. Do not have to be fancy… 3 small lines will do. Put your code into each marketing piece. If you can’t track it, you can’t measure your progress and growth. Ask the client, which marketing piece they called off of. What made you call me instead of a realator.They probably say the commission part.

The cheapest is referrals. Do you know anyone like your self that would like to seize the opportunity? They at least know 2 o3 people. And those 2 or 3 know other people. Get the idea.

Wedding home show.

People go to find gowns, flowers.jewerly, and caterer. Etc… What is the next step after marriage… a house…a car… then kids… gets the idea…

Now remember most American are reading at an 8th grade education… Do not use BIG words.

Give an e-book about testimonals…Tell the story or joke… get them to come back for the climax or punchline.Always be selling and closing. When you were a kid you work your Mom and Dad. If you didn’t get what you want… you cry…That is closing your parents.

Try this for now, because if I give you to much info, your brain might over load… Post this some where so you can visualize .Put a car or a house next to these items… Hell even put your kids next to get you motivate to take action, but at least take action. Now people with bad credit will be in next class schedule… someone has to remind me… too much business with all loans for hard money, commercial…etc… To may request… Thanking for attending Real Estate 101.Good night boys and girls… Where is my apple?:0)

John, I am sure that we all appreciate your input. However, if you are going to post in the forums…maybe you could post something that is original and relevant. Cutting and pasting the same post over and over again is a little ridiculous. ::slight_smile:




Sorry, Was trying to save the guy the time to do his home work. I will find the time to be orginal.Thanks for keeping me on my toes.

I would obtain 95% stated loan on the new property. You obviously have assets (equity in other homes), mid six score is fine and who cares about mortgage insurance, take it instead of the higher rate on the second, it is an investment property, therefore tax deduct expense.

There are now a few lenders out there that offer a program where you can buy down your rate (3,5,7/1 Arm) with NO out of pocket expense to you. (they roll it into the loan amount) As long as you can prove you have the 5% downpayment. This gives you a few years (I recommend the 5) for better cash flow.

Lisa Johnson
Mortgage Planner
Indianapolis, IN