OK I have been reading this sight for a while now and have a question for some of you in the know. What is the best way of pulling cash out of a property I buy for cash? I have the cash to buy the place and fix it up. Then I plan to pull the cash back out once the property is rented and repeat. I have the credit and reserves for conventional financing but don’t want to have to wait 6 months to a year to season the title for conventional financing. Is my only option to get hard money at less than favorable rates and use that loan to free my cash up and get me to the one year mark when I can get a conventional loan?
Also I know of 2 people who got private investors to loan to them @ 6% for 30 years on purchases lately. Are these rates becoming available or are they just lucky? What is the availability of long term private money these days(60%ltv)?
They are either lying to you or the investors that did it are unsophisticated investors…%6 for 30 years?..Thats unreal…I haven’t heard of that from a private investor…Why don’t you ask this friend if the investor will do the same for you…couldnt hurt…
One was legit for sure. It was one of my best friends and the bank pulled out right before the close. An investor stepped in and took pity on them. I honestly think they were just trying to help out a young family that was guna loose out on a great deal. The other I’m not sure about. I was told about it by a mortgage broker that I don’t know well. He made it sound like this type of thing was becoming more common. That’s why I am asking.
Anyway, back to my original question. Any ideas how I should go about financing the type of buy and hold deals that I would like to do.
BNW you had it mostly right when it comes to traditional financing.
But there is a big part you didnt think about. If you bought a house with cash, and then got financing via anywhere…Hard money, private financing, you can then immeadiatley turn and do a rate and term refinance on the property via a Fannie and Fredddie loan without any additional seasoning.
The way the guidelines are written is that they are wanting seasoning for cash out which your loan would be if you had bought via cash and are now wanting cash out. However if you got your cash out via some other loan, you can then immeadiatley do a rate and term refinance, no seasoning issues.
Dumb in a way I know, and yes it will cost you more money in closing costs, and additional paperwork considering 2 loans, but its the world that we live in these days.
Let me run this one buy you guys. I could make an unrelated loan for an unrelated business venture to a trusted family member. Then at the initial purchase they may be willing to lend me the total purchase price of the property at an unfavorable rate with no points, origination fees, or prepayment fees secured by a first deed of trust. Then on Monday morning I could go to a bank and refinance that loan into a conventional loan W/ favorable rates. And perhaps that loan I made to a family member could suddenly become due. Assuming the equity is there could this work?
Let me run this one buy you guys. I could make an unrelated loan for an unrelated business venture to a trusted family member. Then at the initial purchase they may be willing to lend me the total purchase price of the property at an unfavorable rate with no points, origination fees, or prepayment fees secured by a first deed of trust. Then on Monday morning I could go to a bank and refinance that loan into a conventional loan W/ favorable rates. And perhaps that loan I made to a family member could suddenly become due. Assuming the equity is there could this work?
I’m not sure that I’m following you on the loan your making to a family member and then the one from them back to you? Are you saying that your doing this just to get a lien on title that can then be refinanced via a rate and term type loan, without it being a formal loan from a private party, hard money lender, or something of that nature?
I think the lender if they knew that could have an issue with that, but I’m not totally sure, that would be something that underwriting would have to answer for me? I think if you are truly getting a loan from a dis-interested 3rd party then yes you can do that, so long as the lien was recorded against title and it was treated like virtually any other institutional loan.
I think where you could run into trouble and the look of impropriety would be if your doing this as if its a real loan, and in the end its not a real loan, and you used that situation to get around the rules. I think if you play within the rules, but are creative about it…and when in doubt you run it by underwriting (maybe even several investors, as they dont all have the same rules)…if you get a green light with underwriting…then your good…Keep in mind that if you know it you must disclose it!!!
The Truth shall set you free…Grasshopper
I guess what I am getting at is. I could find a property that the owner needs to dump fast at a deep discount. Make a cash offer giving me more leverage. Then essentially loan myself the money for the purchase (threw another unrelated party or even set up a corporation with an unrelated name for this). That way I would avoid all the high fees associated W/private money origination. Then seeing as there is a loan W/ an unfavorable interest rate on the property I could immediately refinance into a conventional loan with good rates with no seasoning period. Essentially by loaning myself the money I could avoid any seasoning period and immediately pull my cash back out. Essentially making this a 100% financed deal with conventional bank financing at great rates. (Assuming the equity is there). And the best part is I would immediately have my cash back and could repeat. If I formed a corporation the loan would be recorded and look no different than any other hard money loan. Perhaps a little unethical in some eyes but if the corp. was formed legit and made me a legit loan I don’t believe I would be breaking any laws. Could this be a possible way to dodge these new laws?
Another question. Will refinancing an existing loan also not come under that new 4 property rule?
Reading this post might make me look a little sinister but basically I am just looking for a way to immediately pull cash back out of investment properties bought for cash.
