Use Conv loan or Delayed Financing

[Dulce Davis]

Where I am buying, the sellers will negotiate better using cash to purchase. The last home I received most my cash back using Delayed Financing, (which is pay cash, rehab, then finance within 6months). My issue though are appraisers that give lower values using this method. Several others said they found this to be true also....For conv financing I'd buy it, rehab, then refinance after about 6 months to get my rehab expenses back. I don't know how the appraisals will go, and I don't like having to wait 6 months. The lender says theres good/bad to both ways. What opinions on it do yall have???

[AJ Exner]

Quote from @Dulce Davis:

Where I am buying, the sellers will negotiate better using cash to purchase. The last home I received most my cash back using Delayed Financing, (which is pay cash, rehab, then finance within 6months). My issue though are appraisers that give lower values using this method. Several others said they found this to be true also....For conv financing I'd buy it, rehab, then refinance after about 6 months to get my rehab expenses back. I don't know how the appraisals will go, and I don't like having to wait 6 months. The lender says theres good/bad to both ways. What opinions on it do yall have???

Hey Dulce,

I do this for a number of my clients and its a great way to have the negotiating power of cash while still maintaining liquidity/capital.

So true delayed financing will be based on the purchase price and then the rehab work that you set in place before/while you apply alongside the After Repair value. DF is how you can recover a good chunk of your purchase cash back (~80-85%) while setting your rehab funds in an escrow that you can draw on as you do the work until you refinance post-seasoning and/or completion of the rehab. 

If you are talking about a true cash out refinance, you would need to wait a period of time (based on the lender) until the property has achieved seasoning. Conventional lenders will ask for 12 months before you can, DSCR lenders will range between 3-6 months usually with most being at 6.

Its just a way for the lenders to make sure that the property is stabilized, but there are still ways to leverage it and keep your systems and processes going. Happy to talk through it if you are going through it with a deal right now.

Thanks!