Frustrated - Refinance part of BRRRR

[Rodney Buford]

Good morning BP,

I am writing this out of frustration partly and also maybe it will help someone else down the road. I was feeling pretty good about my first BRRRR project. Instead of paying someone else rent for my son to live while attending college, I decided to find a property in his college town to fix up and rent out (Duplex).

Everything went pretty well, acquired a hard money loan, hired a contractor (dealt with some issues there), and successfully got it rented out by the bedroom for $300, total income $1200 (2 bedroom 1 bath per side).

My hard money is due at the end of September so I started securing refinancing options at the end of August.  Here is where my challenge started.

I have been through 2 lenders thus far all saying they could do the refinance only to find out after paying for appraisals and submitting all documentation that they couldn't.

• First lender said they could do 80% LTV cash out refinance only to find out the highest they could go was 65% (wasted 2 weeks)
• Second lender said they could do 80% LTV cash out refinance only to find out at the very last minute (wasted 2 weeks) that because my son is living there they consider that an owner occupied property and could not do it.
  • Evidently there is a Fannie Mae and Freddie Mac guideline that prevents me from getting a fixed rate refinance because of my son living in the property which I honestly don't understand.

I am trying to stay positive and mark this down as learning the process.

I pride myself on having tremendous integrity and honesty, so during the process I listed my son on the rental agreements.  Had I put "Joe Bob" on the rental agreement than none of this would be an issue.  I feel like we get penalized for being honest and forthright.

Just needed to vent.  I am facing a hard money penalty now so working through that piece and working with a bank on a 5/1 arm to see if we can do a commercial 5/1 arm cash out refinance.

Not sure where else to turn on this as I don't understand that Freddie Mac / Fannie Mae guideline at all.  Hoping the bank comes through on the refinance.

Thanks for listening,

Rodney

[Shaun Weekes]

Originally posted by @Rodney Buford:

Good morning BP,

I am writing this out of frustration partly and also maybe it will help someone else down the road. I was feeling pretty good about my first BRRRR project. Instead of paying someone else rent for my son to live while attending college, I decided to find a property in his college town to fix up and rent out (Duplex).

Everything went pretty well, acquired a hard money loan, hired a contractor (dealt with some issues there), and successfully got it rented out by the bedroom for $300, total income $1200 (2 bedroom 1 bath per side).

My hard money is due at the end of September so I started securing refinancing options at the end of August.  Here is where my challenge started.

I have been through 2 lenders thus far all saying they could do the refinance only to find out after paying for appraisals and submitting all documentation that they couldn't.

• First lender said they could do 80% LTV cash out refinance only to find out the highest they could go was 65% (wasted 2 weeks)
• Second lender said they could do 80% LTV cash out refinance only to find out at the very last minute (wasted 2 weeks) that because my son is living there they consider that an owner occupied property and could not do it.
  • Evidently there is a Fannie Mae and Freddie Mac guideline that prevents me from getting a fixed rate refinance because of my son living in the property which I honestly don't understand.

I am trying to stay positive and mark this down as learning the process.

I pride myself on having tremendous integrity and honesty, so during the process I listed my son on the rental agreements.  Had I put "Joe Bob" on the rental agreement than none of this would be an issue.  I feel like we get penalized for being honest and forthright.

Just needed to vent.  I am facing a hard money penalty now so working through that piece and working with a bank on a 5/1 arm to see if we can do a commercial 5/1 arm cash out refinance.

Not sure where else to turn on this as I don't understand that Freddie Mac / Fannie Mae guideline at all.  Hoping the bank comes through on the refinance.

Thanks for listening,

Rodney

I read this post and here are the facts based off Fannie and Freddie pricing. If you have a 2 to 4 unit investment property that is being refinanced after 6 months you're looking at 75% LTV. If anyone says they can get you more it's a portfolio product and can't be sold to Fannie or Freddie on secondary market. Also, investment pricing is the worst of the 3 pricing scenarios ( O/O, 2nd Home, IP ) so that rule isn't a rule. And it makes no sense unless you're claiming it as O/O which I don't think you are because you mentioned your integrity. If 75% works for you give @Jerry Padilla a PM and he will close this for you immediately.

Finally, financing should always be lined up first so and you should always use a broker or loan officer that has experience in this arena we call investment properties.  It will take the frustration out of the game for the most part.

Oh, and the loan amount plays a huge part in this.  If it's under 50K you'll start having a really tough time.

I hope this helps and have a great day.

@Jerry Padilla