Why is there a 6-month wait to cash refinance an investment home?

[Susan Tan]

I'm a newbie in real estate investing living in CA and investing in Ohio rentals. I called Quicken Loans. The loan officer said I need to wait 6 months before I can do a cash refinance on a condo rental I purchased in all-cash October 2019. The loan I request is about $40k and the property value is $65k free & clear. Why is there a required waiting time of 6 months? Do you recommend a home equity line of credit on the same property for use on purchasing another investment property? I want to use the BRRR strategy repeatedly. If you need more info about this situation, let me know in comment.

[Annchen Knodt]

Hi @Susan Tan, I'm new to the concept but have been working on obtaining a "delayed financing" loan myself. It's another option from Fannie Mae similar to a cash-out refi (but less well-known) that allows you to pull out cash from a purchase you just made … one way to think of it is as if you'd gotten a conventional loan for the purchase, but you just did it after the purchase instead of before.  

The requirements (that I got from my lender) are: "the new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV and HCLTV ratios for the cash-out transaction based on the current appraised value)." As @Andy Freeman mentioned, I think 75% max LTV is typical, so you should be easily able to get $40k as long as that isn't more than the "actual documented amount of initial investment…"  plus costs associated with the new loan.

I'll also add that it's important that the person/entity who is seeking the delayed financing exactly match the person/entity who made the initial purchase … e.g. you can't get delayed financing as an individual for a purchase you made with funds out of a joint bank account from a partnership/LLC, even if you're a member of that partnership (just a tip from experience :-p)

Good luck!