Turning Flips into Holds Financing

[Steven Perry]

Hello All,

I need help! I have secured my 2nd property this year (and overall). The first one I was able to flip and turn a $20,000 profit and this second one I expect between a $35,000-$45,000 profit on pending any surprises. I am getting them at about 70-75% of ARV and after repairs they are at 75-80%. I am not excited about the fat 39.6% tax bill I am creating for myself (good news bad news about having a good day job). My current financing arrangement is as follows:

I have  a local bank who is giving me essentially a line of credit at 6% paying 1/2 a point and a 6 month call.  I am maxing out what he will give me at 2 properties at a time (approximately $400k).  I believe he would give me 12 month or even 15 month call but I don't believe he will give much more money until I have 5-10 flips under my belt. 

My question is how long do I have to hold onto the property before I could get a long term mortgage to keep the properties as rental properties.  I would want the mortgage to be based off of the new appraised value and not the initial purchase price (after I repair it) so that I can take advantage of the 20-25% equity I have in the property and have minimal or no money out of pocket. This way I can obtain rental income off of them and then ultimately sell at long term capital gains. The initial line of credit does not have a lien attached to the property so I technically own it "free and clear".  Also keeping in mind I don't want to keep my current banks financing for 12 months or more (if possible) because that limits my ability to purchase more properties.  Basically the quicker I can pay back the local bank the better so I can do more deals.

Any guidance is greatly appreciated!