How to get a bank to do a refinance for BRRRR?

[Paul Sterman]

Hi,

My local bank said they will not refinance a BRRRR without me leaving 20% hard money in the property even if my improvements increase the assessed value by more than 20%. Seems to paralyze the BRRRR method.

Can anyone suggest a bank that will allow me to cash out on the BRRRR? Looking in North Carolina (if that matters).

Thanks!
Paul

[Adam Schneider]

@Paul Sterman Regarding refinancing on BRRRR deals, the devil is in the detail. First, not all banks / credit unions are created equal. They have different overlays. What's an overlay? Here's an example. In NC, if you want to buy cigarettes, you need to be 18. But if you go to Walgreens, you have to be....21. Why? Because Walgreens has an overlay policy. Banks are the same way with their underwriting. There are federal guidelines and then the bank's guidelines. The second comment has to do with seasoning. If you ask for a refi after having owned the property for less than the bank's seasoning period (ex 6 or 12 months), the bank will have one set of terms. If you do the refi after the seasoning period, you'll have a different set of terms. For example, the bank may say that they'll only refi 80% of purchase price if before the seasoning period has ended -- but they might be open to lending say 80% of the APPRAISED value, or 80% of the appraised value but not more than you have spent--after the seasoning period has ended.