One of the most frequently asked questions regarding fix and flip real estate investment financing is how to refinance inexperienced and recently listed investment properties. This is especially true for those investors who have houses on the market that are not moving and were bought with hard money.
Real estate investors in such situations want to refinance their homes and place them on regular, conventional financing to lower their owning costs, since interest rates through conventional means are about half of what they are in hard currency.
I’ll be honest with you, these are some of the hardest loans to close. What you are looking to do is an all-cash refinance of a vacant rental property that has been listed on the MLS within the last year. Most lenders simply refuse to touch this type of deal…
Why? Because they don’t want to deal with these loans because they think the only reason you’re trying to refinance is… you want to get rid of your equity… and the minute you get a buyer, you’ll pay off the new loan. . Lenders hate early payments.
I read somewhere that a lender covers the costs necessary to set up and finance your loan at the three month mark. So if you pay a lender in the first 90 days of the loan, the lender loses money. And, lenders absolutely hate losing money.
The number of lenders that will refinance at inexperienced terms and rates is considerable, perhaps 100-150 lenders. The number of lenders that will do inexperienced rate and term refinances on a newly listed property are few. I think you will find that only about 5 will do this type of deal. Not only will you pay for this type of loan at the rate, but about 100% of the time, these offers will have prepayment penalties.
If you decide to keep the property for rent, you may feel fine about prepayment penalties, but you may also have some explaining to do to others! You’ll need a letter of explanation to the insurer stating why you’re being pulled from MLS…and to reassure them you won’t be selling it anytime soon.
It’s good if you can get your CPA to write a letter saying that he/she advised you to take the property off the market because it will be better for your tax purposes to keep it as a long-term rental rather than sell it. and take the hit of capital gains.
Another thing to remember is that these loans are difficult to make if the property was recently listed and almost impossible to make if the property is vacant. So please make sure you have a tenant on the property. Another tip is to make sure that when the appraiser comes to take a picture of your property and do the appraisal, make sure there is no “For Sale” sign in your front yard.
If you have such a sign, the subscriber will see it in the image and it will be a definite “red flag” for them. It won’t hurt to have the sign taken down for a few days, but it will be a deal breaker to have it there.
Agreements like this can be difficult, but they are not impossible. Learn more about financing your real estate investments at Financing your real estate investments [http://www.realtormarketinginfo.com/real-estate-investing/financing-real-estate-investments.html]