We know as investors, you probably have a lot of questions. That’s why the Blink team is here to help, bringing decades of experience to the table to help answer your most burning questions. Like this one below:
Investor Question:
We just finished rehabbing our 1st investment property and we’re considering cashing out the equity we’ve built up. Is this something we can do and if so, how much money can we borrow?
Lender Answer:
Congratulations on completing your 1st rehab! The answers very well might be yes and depends but before jumping the gun, let’s clear a few potential hurdles.
For starters, what is the property’s current appraised value and second, how long have you owned the property?
This is important because whether it be a local independent mortgage company like us, a big wall street bank or even a federal credit union, any and all lenders that offer Conventional loan products must follow the set of core rules set forth by Fannie Mae and Freddie Mac. Said another way, your best friend could be the President of a major local bank, lender or credit union and if the loan you seek does not meet Fannie Mae or Freddie Mac guidelines, your best friend won’t be able to help you. Having these guidelines in place is good for you, we promise!
We know your time is extremely valuable and you’ll always want to make sure a few of these rules are cleared prior to investing too much time and effort refinancing.
The most challenging rule for real estate investors is referred to in the lending industry as Seasoning.
What is Seasoning? This is length of time and in this case specifically pertains to how long you have owned the property. If you want to cash out your equity based on the appraised value, then you must own the property for a minimum of 180 days prior to cashing out any equity (based on the appraised value). And that is the important thing to distinguish here, cashing out equity based on the appraised value and not the purchase price, as seen in delayed financing.
Once you have owned your investment property for 180+ days you have cleared the LTV hurdle (LTV = Loan To Value) and are eligible to borrow up to 75% of the appraised value of the property and cash out your equity based on the difference of what you owe and what you can borrow.
Example Investment Scenario:
If you currently owe $90,000 on your rental property and the appraised value is $180,000, you can cash out up to 75% (LTV) of the appraised value for a new loan of $135,000. Your current loan of $90,000 will be paid off at closing and you’ll receive a cashier’s check or wire for the difference in the amount of $45,000 minus closing costs and/or escrow set up should you chose to include escrow (paying your property taxes and insurance within your monthly payment as opposed to paying them in a lump sum once a year).
To recap, here are the questions you’ll want to answer about cashing out the equity in your investment property:
- How long have you owned your investment property?
- Do you currently have a loan on the property? If so, how much do you owe?
- What is its current appraised value?
If this sounds confusing, don’t worry; our team of lending experts has you covered. If you are interested in exploring your options or have questions related to your investment property or how to get started, don’t hesitate to call (713-GO-BLINK) or email (loans@blinklending.com). We are always here to help and have helped hundreds of real estate investors in the Houston area, so contact us.
Blink offers short term Private Money Loans and long term Conventional Loans so whether you are looking for a quick rehab loan or a traditional 8 – 30 year fixed rate mortgage, we are confident we have a loan program that aligns with your investment strategies.
