Seasoning period for cash buyers?

Question

I was under the impression if you paid cash to purchase a property that  you would then be able to cash out refinance as soon as you have  finished the rehab and rented the unit out utilizing the BRRRR  strategy. I was just told in another thread that even if you pay cash  for a property you still have to wait 6 months in order to get your cash  back out at the ARV value and if you try to cash out refinance prior to 6 months you would only be able to get the LTV  based on the purchase price. Is this the case all the time or does it  vary depending on the lender? The whole point of the BRRRR strategy is  to force appreciation through the rehab ultimately creating a higher  value and appraisal so when you take your 70-75% LTV you get all of your  money back out. Can anyone help clarify?

Account Closed · Answer

hi Brian - here's the deal on delayed financing through Fannie Mae -- if you buy a property in cash, you can take cash out within the first 6 months using the delayed financing exception (other than death, inheritance or divorce this is the only way to take cash out on a conventional loan within the first 6 months) -- 1) all money used to purchase the property must be your money.  You have to present the closing statement to the lender and source of funds to prove the property was purchased with your cash (can be borrowed from HELOC, etc as well).  The loan must disburse no more than 6 months from the date you purchased the property.  2) the lender can you lend you up to 70% of the MARKET VALUE (per an appraisal) of the home (not the purchase price), provided 70% of market value is not greater than the original purchase price. Keep in mind the rehab must be complete and the property condition must adhere to FNMA standards from an appraisal standpoint (all rooms must be finished, painted, etc., and meet applicable state laws related to carbon monoxide detectors, water heaters, etc.).  You can typically qualify for this so long as you will not have more than 10 financed 1-4 unit residential properties after taking the cash out.  Feel free to PM me with any additional questions

Brian Garrett · Answer

Thanks Brian I responded to you over in the other section. Appreciate it!

Brian Garrett · Answer

Thanks Stephanie I'm going to try and go the conventional route however I don't think I will qualify since I don't have any W2 income. I'm going to try all of my local banks to see if they can pull any strings but if not then I will have to go through commercial loans or portfolio loans at that point.

Stephanie P. · Answer

@Brian G.

The recommendation we provide all of our clients is to exhaust the conventional financing route first, meaning use as much delayed financing and other means first before getting into portfolio or commercial financing, but if you're looking for no seasoning products for the BRRRR strategy, you may be relegated to a commercial loan event though the rates aren't nearly as attractive.

Stephanie