Best way to take refinance my equity out of an investment property?

Q

QHBruin_IHB

New member
I recently purchased an REO property in Santa Ana for all cash and I want to pull out the money to return to my normal business operations. My questions are these:



1) Is there a "cooling off" period I need to wait before I can refinance the property?

2) To refinance the home, should I use an HELOC or normal 1st trust deed mortgage?



Thanks in advance
 
Sheesh.



Is this all snark?



I hope?



Did you consult anyone before doing this?



Do you know the meaning of the work knife-catcher?



Did the last year not happen for you? Were you on a secret

installation on Mars without any communications from earth.



You can get your answer from somebody else. The banking system

is going downnnnn. This is not a good thing. I'm not gonna lay one

more straw on the decomposing camel.
 
Nah, not snark....I'm asking a legitimate question. I found a really good deal on a place and had to act on it fast. Using all cash put my offer in the front of the line. The place cash flows well with a cap rate of close to 13%.



From the research I've done, usually there is a cooling off period of about 12 months if a foreclosure is bought at the courtyard steps. But since this is an REO, I was uncertain if that cooling off period still applies. I was hoping someone here would be able to clarify things for me.
 
I'm not a mortage person, but since no one seems to be answering your question..... HELOC variable will be low until the feds fund rate goes up and a second is always higher interest rate than a first. For the best rate, you'll want to take out a first mortgage on it. On investment properties today you can go 70-75 LTV. Your rate will proabaly be at least in the 7's. The cooling off period is for seconds or maybe refinancing, but this is the bank's discretion, not the law. I'm not sure which lenders are best for investment property loans.
 
But of course he wants to extract the equity immediately ! That way, when/if the house value tanks....he can walk away with his "investment" money intact. Isn't that all the rage these days ? :smirk:
 
[quote author="Trooper" date=1217509578]But of course he wants to extract the equity immediately ! That way, when/if the house value tanks....he can walk away with his "investment" money intact. Isn't that all the rage these days ? :smirk:</blockquote>
I'm actually starting to think the people who sucked out all the housing bubble equity were the smart ones and the financially responsible ones missed out on the free money. :down:
 
[quote author="QHBruin" date=1217069921]Nah, not snark....I'm asking a legitimate question. I found a really good deal on a place and had to act on it fast. Using all cash put my offer in the front of the line. The place cash flows well with a cap rate of close to 13%.



From the research I've done, usually there is a cooling off period of about 12 months if a foreclosure is bought at the courtyard steps. But since this is an REO, I was uncertain if that cooling off period still applies. I was hoping someone here would be able to clarify things for me.</blockquote>


Nice move!

Double-digit cap (13) is extremely rare or non-existant these days.

Too bad you need to pull the money out and can?t let it ride.

If you don?t mind share some specifics, what will be the cashflow after DS?

I?m impressed and from a Bruin no less.
 
[quote author="Trooper" date=1217509578]But of course he wants to extract the equity immediately ! That way, when/if the house value tanks....he can walk away with his "investment" money intact. Isn't that all the rage these days ? :smirk:</blockquote>


Many investment property owners keep their rentals mortgaged as much as they can because it allows them to leverage the investment. He paid cash for this house and now wants to move some of that investment money into something that will give him a better return than a 7% tax deductible loan.
 
[quote author="stepping_up" date=1217546090]



Many investment property owners keep their rentals mortgaged as much as they can because it allows them to leverage the investment. He paid cash for this house and now wants to move some of that investment money into something that will give him a better return than a 7% tax deductible loan.</blockquote>


The downside to that is it lowers your rate of return.

Hopefully, he?ll share the numbers and we?ll see how it shakes out.
 
[quote author="tenmagnet" date=1217546487][quote author="stepping_up" date=1217546090]



Many investment property owners keep their rentals mortgaged as much as they can because it allows them to leverage the investment. He paid cash for this house and now wants to move some of that investment money into something that will give him a better return than a 7% tax deductible loan.</blockquote>


The downside to that is it lowers your rate of return.

Hopefully, he?ll share the numbers and we?ll see how it shakes out.</blockquote>


As I understand it, the rate of return would be calculated on the actual cash tied into it, so if it cash flows and you have very little of your own money in it, then you can have a pretty good rate of return. What do you guys think of this calculator <a href="http://www.mortgageinvestment.com/Investors_in_Real_Estate/investment_rental_real_estate_profit_predictor.htm">Real Estate Predictions Spreadsheet</a>
 
When we pulled equity out of our rental, the requirement was that could only take up to 70% of appraised value. Getting a descent appraisal these days can be difficult.
 
[quote author="tenmagnet" date=1217546487][quote author="stepping_up" date=1217546090]



Many investment property owners keep their rentals mortgaged as much as they can because it allows them to leverage the investment. He paid cash for this house and now wants to move some of that investment money into something that will give him a better return than a 7% tax deductible loan.</blockquote>


The downside to that is it lowers your rate of return.

Hopefully, he?ll share the numbers and we?ll see how it shakes out.</blockquote>


Silly Trojan...Leveraging the place increases my rate of return. My ROI on this place at 100% cash is around 12.37%. If I am able to take out 70% of what I invested, my invested amount decreases thus increasing my ROI to around 22%. It definitely beats the 3.25% I was getting at ING Direct. I think you were thinking of was Cap Rate, not ROI. But I calculating my Cap Rate using NOI which does not include interest expense or depreciation. Briefly, the rent subtracting tax, insurance and reserve for repairs will give me an NOI of $2000/month and with my purchase price of around $200k, the cap rate stands around 12-13%.
 
[quote author="Trooper" date=1217509578]But of course he wants to extract the equity immediately ! That way, when/if the house value tanks....he can walk away with his "investment" money intact. Isn't that all the rage these days ? :smirk:</blockquote>


Geez, there's a ton of snark on this board. You want some cookies with that haterade? or should I say donuts. hehe j/k.
 
[quote author="tmare" date=1217552041]When we pulled equity out of our rental, the requirement was that could only take up to 70% of appraised value. Getting a descent appraisal these days can be difficult.</blockquote>


Yes, this 70% is what was told to me at Wells Fargo. To answer my own question from earlier and for people who might want to know, the "cooling off" period refers to the bank's need for a 12 month rental history on the investment property for them to calculate their underwriting. Since my purchase is an REO, I do not have this history and they will not let me refinance thing as an investment property. They will only loan me the money based off the standard debt to income ratio based off of my income.
 
[quote author="QHBruin" date=1217563789]

I think you were thinking of was Cap Rate, not ROI. But I calculating my Cap Rate using NOI which does not include interest expense or depreciation. Briefly, the rent subtracting tax, insurance and reserve for repairs will give me an NOI of $2000/month and with my purchase price of around $200k, the cap rate stands around 12-13%.</blockquote>




Yeah, I was thinking cap rate.

Which looks very good.

Okay, let?s say you pull out $140K, what are the numbers on the financing?
 
[quote author="tenmagnet" date=1217564819][quote author="QHBruin" date=1217563789]

I think you were thinking of was Cap Rate, not ROI. But I calculating my Cap Rate using NOI which does not include interest expense or depreciation. Briefly, the rent subtracting tax, insurance and reserve for repairs will give me an NOI of $2000/month and with my purchase price of around $200k, the cap rate stands around 12-13%.</blockquote>




Yeah, I was thinking cap rate.

Which looks very good.

Okay, let?s say you pull out $140K, what are the numbers on the financing?</blockquote>


That puts it at an annual GRM of under 8. Even with $140K at 9%,the payment is $1126. That'll push his ROI to about 26%.



Where was this at? Santa Ana? Is it a bunk house? What in Santa Ana is grinding ~$2400+ month in rent with a purchase price of two bills?
 
[quote author="No_Such_Reality" date=1217567616][quote author="tenmagnet" date=1217564819][quote author="QHBruin" date=1217563789]

I think you were thinking of was Cap Rate, not ROI. But I calculating my Cap Rate using NOI which does not include interest expense or depreciation. Briefly, the rent subtracting tax, insurance and reserve for repairs will give me an NOI of $2000/month and with my purchase price of around $200k, the cap rate stands around 12-13%.</blockquote>




Yeah, I was thinking cap rate.

Which looks very good.

Okay, let?s say you pull out $140K, what are the numbers on the financing?</blockquote>


That puts it at an annual GRM of under 8. Even with $140K at 9%,the payment is $1126. That'll push his ROI to about 26%.



Where was this at? Santa Ana? Is it a bunk house? What in Santa Ana is grinding ~$2400+ month in rent with a purchase price of two bills?</blockquote>


I would think NOTHING.
 
[quote author="QHBruin" date=1217563825][quote author="tmare" date=1217552041]When we pulled equity out of our rental, the requirement was that could only take up to 70% of appraised value. Getting a descent appraisal these days can be difficult.</blockquote>


Yes, this 70% is what was told to me at Wells Fargo. To answer my own question from earlier and for people who might want to know, the "cooling off" period refers to the bank's need for a 12 month rental history on the investment property for them to calculate their underwriting. Since my purchase is an REO, I do not have this history and they will not let me refinance thing as an investment property. They will only loan me the money based off the standard debt to income ratio based off of my income.</blockquote>


Wouldn't a one year lease satisfy this?
 
[quote author="stepping_up" date=1217574054][quote author="QHBruin" date=1217563825][quote author="tmare" date=1217552041]When we pulled equity out of our rental, the requirement was that could only take up to 70% of appraised value. Getting a descent appraisal these days can be difficult.</blockquote>


Yes, this 70% is what was told to me at Wells Fargo. To answer my own question from earlier and for people who might want to know, the "cooling off" period refers to the bank's need for a 12 month rental history on the investment property for them to calculate their underwriting. Since my purchase is an REO, I do not have this history and they will not let me refinance thing as an investment property. They will only loan me the money based off the standard debt to income ratio based off of my income.</blockquote>


Wouldn't a one year lease satisfy this?</blockquote>


I believe a completed one year lease would satisfy it, not just the lease agreement. The bank is asking for rental history. The writer says it's a recent purchase. It looks like he or she will have to wait a bit.
 
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