Quick refinance success stories?

[Tom Shepard]

Trying to start out slow and steady, (and somewhat idiot proof for me) my wife and I paid cash for our first real estate investment (buy and hold) at the end of February. Our goal is to diversify some or our portfolio out of the stock market and supplement my W2 job retirement in 7-10 years. We planned to make our second purchase probably around the same time next year after bonus season, new tax year, etc. As I am continuing my REI education on BP and meeting other great investors, we are thinking we should take some of the cash out of that first investment and get another deal going now. I have talked to two banks and they said we have to own it for 6 mo before they will refi. I am hearing different from various sources on BP, podcasts, blogs, etc. Can someone with experience refinancing a cash purchase shortly after buying share whether they went to a conventional bank, small local bank, or elsewhere? How did you start the conversation to ensure success? Thanks!

[Michael Noto]

@Tom Shepard My business partner and I have completed the strategy you are talking about with 3 different properties and are currently going through another refi right now.  The properties we bought, rehabbed, and refi'ed were all 2-4 unit buildings.

We are in Connecticut, not Tennessee but the feedback we received from banks on the regional and national level was that other than the local banks that hold their own paper (portfolio lender who makes portfolio loans) there was going to be a 6-12 month seasoning period for the refi.  Upon hearing that we did the following.

• turned our focus to the local banks for a refi because we knew worst case we could always wait the 6 months and refi with a bigger bank so why not try and develop relationships with someone who can refi us quicker?
• We called every single local/community bank in CT (I am not kidding) and asked to speak to whoever handles their commercial loans and asked them about their portfolio loan programs if they had any
• Finally we connected with one that does portfolio loans and what do you know he happened to already know our hard money lender really well and had refi'ed deals financed by him before. We did not know of their relationship prior to calling the bank but it worked out.  We have done 2 of our refi's through them
• The 3rd refi was done through a portfolio lender that called us while we had a property going through a rehab.  Perfect timing, but we had kept in touch with said lender every month and the "checking in" paid off.  We figured it is best to have a relationship with multiple portfolio lenders because if one denies you for a loan you have a backup to go to.  In fact right now we are refi'ing through a 3rd portfolio lender who gives loans based on the asset which is unique.
• What helped us obtain the refi's I think was our track records and the fact that the properties we bought were good deals and attractive to a bank to refi. The numbers worked very well.  Prior to trying this strategy, between the two of us we had a decade of experience owning, managing, and rehabbing multi families.
• Also, when we met with the lenders the first time we had a small packet made up and devoted to each project we each had ever done.  It just gave a quick rundown of the numbers and before and after pics.  Nothing fancy.  Again, just to show we had experience.

The biggest difference overall in dealing with a portfolio lender is they have the flexibility in most cases to be the ultimate decision maker on whether you get a loan or not.  As a borrower you do not have to fit into a little box like you would for a loan that is going to be sold off.

This was a little long winded.  If you need clarification on anything let me know.