delayed financing, including rehab costs in escrow

[Gary Parilis]

In earlier discussions, I read about an obscure provision that makes it possible to do a full cash-out refinance immediately after purchase and rehab, without waiting the seasoning period and including the rehab costs in the acquisition cost, but I can't find the discussion.

Background:

1. In a BRRRR, if you purchase with a mortgage, you need to wait a seasoning period, typically 6 months, before you can do a cash-out refi.

2. The "delayed financing exception" allows you to obtain a cash-out mortgage immediately after rehab if you initially buy with cash. But this loan cannot be greater than the acquisition cost of the property (purchase price + closing costs), even if the ARV is large. This means you cannot get the rehab costs out for 6 months.

3. I have read in BP conversations that there is a way around that... If you buy with cash and put the rehab funds in escrow at the time of purchase, that amount can be included in the acquisition cost, and therefore it's possible to get a mortgage right after rehab for an amount equal to the full investment (assuming the ARV is big enough that the LTV is at least equal to that total acquisition cost).

Is anyone familiar with this approach? I'm certain I read it, but can't find it and need to validate its veracity... 

Thanks.

[Matthew M.]

@Gary Parilis yes that is what I am talking about. I include the rehab + any inspections on the hud and get the lower of 70% of the arv or whatever is on the hud.