Buy,Rehab,Refi,Sell
Hello fellow investors I am currently in the process of rehabbing my first house and initially I planned on selling when the work was done. Now I am considering refinancing first as soon as its complete so I can pay back my HML and began my next project. Heres a few numbers for you.....
ARV- 60k
Purchase- 17k
Repairs- 10k
HML- 33k (purchase, rehab, fees)
I was thinking about refinancing at 80% that will give me 48k. When I pay back my HML i would pocket roughly 15k, minus loan fees. Then put it up for sale at 55k and set some money aside for the holding costs. In the mean time I would be beginning my next project and by the time the next one is complete I should have the first one sold. Does this seem like a good idea to be repeated over and over? Where does capitol gains hurt me at?
The problem is you are going to pay origination fees and things to refinance, so you will be losing a little profit. Perhaps refinance, pull out profit, and rent? Capital gains won't be affecting you, as you will be at regular income. You must own property longer than a year to pay at capital gains rate.
Quote:
On 2004-11-26 23:47, bacardidark313 wrote:
Hello fellow investors I am currently in the process of rehabbing my first house and initially I planned on selling when the work was done. Now I am considering refinancing first as soon as its complete so I can pay back my HML and began my next project. Heres a few numbers for you.....
ARV- 60k
Purchase- 17k
Repairs- 10k
HML- 33k (purchase, rehab, fees)
I was thinking about refinancing at 80% that will give me 48k. When I pay back my HML i would pocket roughly 15k, minus loan fees. Then put it up for sale at 55k and set some money aside for the holding costs. In the mean time I would be beginning my next project and by the time the next one is complete I should have the first one sold. Does this seem like a good idea to be repeated over and over? Where does capitol gains hurt me at?
I would think the problem with this is being able to refinance right away. I can't find anyone who will refi me without seasoning at least 3-6 months and usually a year
Joe
And somewhat related to all the above, how bout if I bought a foreclosure for 40K with my own cash 5/04 and it is worth 85K now ; can I get no doc financing? Does that need seasoning?
Couple of things to think about (just my opinion):
1) Every time you refi you lose money - no if's, and's, but's about it. You have to decide it that money is worth the oppty cost of not moving on to the next deal or if maximizing your profit is the objective.
(My 2 cents - slow is not a bad thing. Suggest you actually get to the closing table. Unless you've got lots of money to float & and a bank of houses you're working on, you just never will know what will happen with a house, you financial situation, etc.
2) Seasoning is different with every lender. Some lenders require it some don't. If that's what you really want to do, keep looking for a loan officer or local bank that understands what you're doing and will work with you.
3) Captial Gains - depends on where you are and how the IRS will "classify" you. If this is your first property and you own another house and you held this property in your name (maybe even in an LLC), you might just have to pay Captial Gains. But if you've been "classified" as a "dealer" then you will have to pay regular income on the profits. Get a really good accountant who understands real estate investing on this one
All in all, it just depends on the risk you are willing to take in regards to your cash on hand and your overall profits.
Good luck,
~s