How Soon Can One Refinance?

[Mike Ojo]

Hi,

If I were to invest in a fixer-upper, say a budget of $150k to buy and fix. How soon would I be able to refinance the property post renovations? the BRRRR strategy advises to refinance after 12 months, but can you refinance sooner?

- If original loan was a mortgage

OR

- If original loan was from private lender

Thanks.

[Alex Manley]

@Mike Ojo Welcome to BP! As @Marty Johnston noted, most standard conventional lenders will require anywhere from 6-24 months seasoning before a refinance goes through. However, there are lenders out there that will require little to no time at all. Typically, you would want to look at either portfolio lenders or local community banks, as these types of lenders will be more flexible in what they are willing to do.

Additionally, it may be best to wait to refinance until the property you are rehabbing has been filled with tenants. This is due to the way that lenders qualify the income from an investment property. Some will require at 1 or 2 year waiting period before counting rental income, while others will apply 75% of the rent as income. This will vary from lender to lender, so you will need to speak with them about their income qualification process.

One final note would be to beware of any pre-payment penalties.  While these are much more common on commercial real estate loans, it is always something to be aware of if you are using a private lender. These can run very high, often anywhere from 1%-5% of the principal paid off.

The BRRRR strategy seems to be an excellent one, and is the strategy I plan to pursue on my first house hack. Good luck on the Refinance portion of the strategy.