Please forgive me if this has been asked already. I don’t see it when searching topics. And please forgive me if this seems like a dumb question. I am a newbie.
I understand the fact that it is probably in my best interest to use hard money to purchase a SFR that I want to hold and rent. The rental market in the Tampa Bay area is great right now. I found a house for $90K, needs work but has an ARV of $125K. There are a lot of these deals (and better ones) here in the Tampa Bay area. I already have someone that wants to rent the home after I do the repairs. I have a hard money lender willing to lend 70% of the $100K as-is value which is $70K. So I have to come up with the other $20K. The rate is 14% for 12 months with 3 month extensions for a fee.
So obviously I would want to refinance with cash out once the repairs are done because I want to get my $20K back to put some skin in the game for the next house. Who does refinances for hard money? Is it a traditional refinance with a BOA, Wells Fargo, etc? Or are there only specific places that do re-finances for hard money?
Is that the way it works? Use hard money to buy at as-is value, do the repairs and then refinance with cash out at 75% LTV so I can get cash for the down payment on the next hard money loan?
Thanks, in advance, for your guidance and answers.
assuming you can qualify for the refinance personally, the biggest obstacle is the second appraisal,appraisals are coming in all over the place today, I had a hard money lender appraise a property at $110k,3 months later an appraiser came in at $85,another appraisal came in at $100k,just don’t freak out if the appraisal comes in low
you should use a mortgage broker for the refinance, many banks won’t refinance without substancial seasoning,the brokers know who will and who won’t,makes your life easier than applying, going through the process then the bank saying “sorry, we need 12 months seasoning” or whatever
What’s it going to rent for? Do you have the cash flow to sustain properties that potentially have equity but carry negative monthly cash flow? $100,000 @ 5% for 30 years is going to cost you $537 a month just to service the debt. If you believe in the 50% rule for expenses you’re going to need rents of $1,100 to break even. I have heard Florida is terribly expensive to insure properties, how are the property taxes? The 50% rule may be too low in that area.
Renting a house for $800 that has a mortgage of $537 a month is a long term losing proposition. You still need to figure out the rental side.