Getting Money Out Of A Property Fast To Invest Again.
How fast can I get my money out of my property after i have purchased it so that i can reinvest again. Does it depend on the lender I am using or can I do it right away with a refinance.
Example.
on an apartment building
building is worth $67500,000
Purchase price $500,000
I put $100,000 downpayment
Mortgage on building is 400,000.
Can I refinance right away to pull out the $275,000 that i have in equity immediatly after I purchase the property so that I can invest again. If so what would I have to do step by step.
Jeff
I am a newbie but from what I have been learning from a couple of deals I have on the table, the financing industry has the standard 20% down requirement on investment property. The 20% does not have to come from from your pocket though. The deals I have on the table are going to have the seller carry a second mortgage for the 20% and forgive that after closing meaning its a phantom 20% LTV to the bank (the down payment) and then the seller is going to give me cash back at closing once the bank pays the 80% LTV. In relation to your question, if the appraised value of the apartment building building is $67500,000 then:
The seller can carry a second mortgage for $135,000 (20%) and forgive after closing.
This would leave $540,000 that the lender would pay. This is only $40,000 over the purchase price but you would have the seller give you this check at closing. At the same time you did not put up $100,000 that you were intending to put down. That's a total of $140,000 that you would keep and still acquire the property.
There are contracts that you would require the seller to sign to protect yourself as far as forgiving the second mortgage and getting $40,000 at closing.
Also there are what is called "unseasoned" refinance loans that don't require the property to be owned for months. Ask around.
Hopes this helps some.
Karl
Jeff,
Most banks I deal with will refi immediately as soon as the deed is recorded in public record (30-60 days). They don't care about seasoning since I am the one keeping the property. I would think you could get 75% LTV , in which you could pull out 506,250 if it did indeed appraise for 675,000. This way you have no money tied up in the property. Make sure the new mortgage payments won't kill your cash flow.
Hope this helps !
Jason
Does this mean that I can keep the entire 506,250 that I get from the 75% LTV or do I keep only whats left adter the previouds mortgage has been paid in full?????
I believe that you could only cashout up to 75% of the value. For example, buy for $50,000 and worth $100,000. You can cashout up to 75% or $25,000 in total. Check with your lender or broker and see if they will allow a cashout based on appraised value vs. purchase price.
With great care in you structure. Try and keep from fraudulent intent.
Long term wise the reduction in spendable income caused by your refinance may stick a shiv in your back as you go forward in time. Let not desire for present time cash take you away from proper structure. I am quoting with some subtle changes my mentor. Mr. Niccolo di Bernardo de Machiavelli
With all due respect, Lucius
Quote:
On 2004-01-03 12:40, klsher wrote:
I am a newbie but from what I have been learning from a couple of deals I have on the table, the financing industry has the standard 20% down requirement on investment property. The 20% does not have to come from from your pocket though. The deals I have on the table are going to have the seller carry a second mortgage for the 20% and forgive that after closing meaning its a phantom 20% LTV to the bank (the down payment) and then the seller is going to give me cash back at closing once the bank pays the 80% LTV. In relation to your question, if the appraised value of the apartment building building is $67500,000 then:
The seller can carry a second mortgage for $135,000 (20%) and forgive after closing.
This would leave $540,000 that the lender would pay. This is only $40,000 over the purchase price but you would have the seller give you this check at closing. At the same time you did not put up $100,000 that you were intending to put down. That's a total of $140,000 that you would keep and still acquire the property.
There are contracts that you would require the seller to sign to protect yourself as far as forgiving the second mortgage and getting $40,000 at closing.
Also there are what is called "unseasoned" refinance loans that don't require the property to be owned for months. Ask around.
Hopes this helps some.
Karl
Good Example!
Jeff,
When you refi, you pay off the underlying loan and put a new loan on the property. In this case
506,250
- 400,000
You could theoretically pull out 106,250 (less some closing costs) in your pocket. With a higher LTV, cash out, the % rate will be higher so watch that cash flow !
Jason
Look a smaller local banks. I have one I work with that will do 80% LTV on a purhcase or refi. Smaller is better, you get better service and create a relationship with the lender, which can be a good thing when you get a tough deal.
Klsher,
I'm not an attorney but I believe that would be fraud. I am also not a CPA but I believe that the owner would be making a gift that would be counted against his lifetime credit amount and you would be taxed for all or part of the amount forgiven as ordinary income. But I could be wrong.
Kisher,
From what I understand what your doing is considered bank fraud. Not saying that these type of deals do not take place everyday but you may be giving advice that could get someone in a lot of trouble including yourself.
Can someone please clarify whether what kiscer suggested is definitely illegal or not? I've heard of people conducting similar deals numerously and wasn't aware that it would constitute bank fraud. Best wishes,
DK.
I could probably get you up to an 80% LTV cash out refi (with no seasoning)
This would pay off the current mortgage plus give you @ 140K.
Of course you'd have to see how you feel about the effect on your cashflow (but then, I don't know what interest rate you are paying on now)
Feel free to PM me
Maybe I missed something but you did not state how many units are in this property. The method in which you acquire cash out refinancing will be completely different for 2-4 unit properties and 5+. I know the dollar amount may seem high to some people, but in my market of Chicago you can buy 2-4 unit properties in the $600K-900K+ range.
The property is an 8 unit building that brings in about 105,000 a year. 90,000 is my net profit a year.
Kisher says its illegal is that true I really want to know too.
I believe the deal as described is not good
Just waiting for the experts here to show up and set us straight