Concerning BRRRR-why not finance before buy and then refinance?

[Steven Marks]

I understand that if you buy a property in cash, rehab it, and then take out a loan against the property, you take more money back out because of the greater value of the property after rehab. Is it not possible to take a loan on the property in order to buy it, rehab it, and then refinance the loan against the higher value of the property? Is this not something that's possible, or easily done? My understanding of loans and financing is pretty limited.

[Greg Scott]

Originally posted by @Steven Marks:

I understand that if you buy a property in cash, rehab it, and then take out a loan against the property, you take more money back out because of the greater value of the property after rehab. Is it not possible to take a loan on the property in order to buy it, rehab it, and then refinance the loan against the higher value of the property? Is this not something that's possible, or easily done? My understanding of loans and financing is pretty limited.

If you pay cash for a property, you have to wait 6 months to do a cash-out refi.  You also have to have a lot of cahs.  You could also do delayed financing, but that will only lend you 75% of the purchase price, not the rehab, then you need to wait 6 months to get the rest through a cash-out refi.  Not a great strategy.

Alternatively, you could use a private / hard money loan to buy & rehab and then just convert to a rate & term refi as soon as the work is done and a tenant is in place.  With that strategy you minimize your out of pocket up-front and then don't have to wait for a refi.